Oil down again on worry over USA crude stockpile situation

Oil prices stabilise at $61.58/b over by OPEC production cut

But the market has turned volatile lately on worries about a possible slowing in the Chinese and global economies this year, and new record production rates forecast next year for US crude output.

Oil prices edged up on Friday as turmoil in Venezuela increased the chances of tighter global supply if the USA makes good on signals that it could impose sanctions on Venezuelan exports.

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

The oil price maintained its new year strength as American geopolitical issues came to the fore in the shape of sanctions against Venezuela.

Analysts said oil remains under pressure amid growing concerns about a slowdown in global economic growth. The West Texas Intermediate for March delivery fell 39 USA cents to settle at 52.57 dollars a barrel on the New York Mercantile Exchange, while Brent crude for March delivery slid 36 cents to close at 61.14 dollars a barrel on the London ICE Futures Exchange.

The White House on Wednesday took the dramatic step of recognizing Venezuelan opposition leader Juan Guaido as the South American country's legitimate president.

If the United States decides to deploy a slate of sanctions that it is said to have drafted against the Latin American nation, American refiners - the No. 1 consumer of Venezuelan crude exports - would be forced to cease purchases.

Beyond oil supply, a key question for this year will be demand-growth.




USA refineries that depend on Venezuela's heavy crude would have even more trouble securing supplies as Canadian and Mexican crudes are often not as discounted and are limited in availability.

US West Texas Intermediate (WTI) crude futures were at $53.76 per barrel, up 63 cents, or 1.2 percent.

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.

"Forcing Venezuela into the spot market to dump prompt crude puts them in a corner". The Trump administration has drafted a slate of potential restrictions on Venezuelan crude exports but hasn't decided whether to deploy them, according to people familiar with the matter.

The biggest U.S. importers of Venezuelan crude previous year were Citgo, Valero and Chevron, according to Rystad Energy. Right now, it's anyone's guess whether the situation in Venezuela will offer the cartel a helping hand by mildly curbing supply, make its job even harder by adding more crude to the market, or upend its plans altogether and force a reversal of its cuts to prevent an oil-price spike.

The Canadian energy industry's shortage of pipeline capacity - due largely to environmental opposition and regulatory delays to planned projects - grew so dire a year ago that Alberta's government mandated production cuts to clear up shipping space and prop up local crude prices that had plunged to record lows.

"Sharp production cuts by Opec plus have kept crude oil futures supported however as market reports indicate for a marked output reduction in December 2018", said Benjamin Lu, analyst at Phillip Futures.

Other industries that rely heavily on oil may feel impacts. While a cutoff of Venezuelan imports would raise prices for refiners in the Gulf Coast, the market is competitive enough that producers are unlikely to pass along much of the cost to consumers, experts said.

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