Oil climbs on Venezuelan crisis despite surging US supply

Oil Price Fundamental Daily Forecast – Unexpected Inventories Build Sinks Prices

"The oil market is partially pricing in the risk to Venezuela's crude production, which has been plummeting in recent years", Vandana Hari of Vanda Insights said.

West Texas Intermediate crude for March delivery gained 51 cents, or 1 percent, to $53.64 a barrel on the New York Mercantile Exchange as of 12:25 p.m.

"Although it is clear that a major disruption in Venezuela's oil flow could be ahead, the oil market may ignore the possible physical effect in the short term", Barclays said.

WTI met some fresh buying interest earlier in the day on rumours that the USA could impose sanctions on Venezuelan oil exports in response to the rising social turmoil in the Caribbean country.

Oil on Friday closed higher for the third day in a row as a deal to reopen the United States government eased investor fears while political turmoil in Venezuela roiled one of the world's biggest suppliers of heavy crude.

U.S. President Donald Trump was said to be considering new sanctions against Venezuela as Maduro faces one of the toughest challenges to his reign.

Oil market sentiment was also weakened by an increase in US crude inventories after refineries cut output, data from industry group the American Petroleum Institute showed on Wednesday.

Prices of heavier USA grades like Mars Sour, an offshore medium US crude, and Heavy Louisiana Sweet crude have risen as buyers scramble for supply.

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The output surge has swollen USA fuel stocks, and crude inventories rose by 8 million barrels last week, according to official data released on Thursday.

Suspense over U.S. -China trade talks and broader gloom over world economic growth put a check on prices, however. It is frequently blended with lighter crudes to give refiners higher-value products.

But the consequences could also ripple throughout the broader oil market and complicate OPEC's relationship with the United States.

"With the US now clearly taking sides with the opposition, changes might be in the making", said Tamas Varga, an analyst at PVM Oil Associates Ltd.in London.

Refineries along the Gulf Coast are set up to process heavy crude and they may end up spending more money buying it elsewhere.

"The crude quality mismatch will grow even bigger", Paola Rodriguez-Masiu, an analyst at Rystad Energy, said Thursday in a report. In 2009, (OPEC) had revealed that Saudi Arabia's reserves stood at 265 billion barrels in 2009. The economic relationship between the two nations is being brought into focus as there may possibly be a USA embargo against Venezuelan oil.

The American Fuel & Petrochemical Manufacturers, which represents 95 percent of the refining sector, has lobbied hard over the past two years against any attempts to restrict imports of Venezuelan oil.

EIA reported a almost 8M barrel build during last week.

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