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Oil prices finish higher Tuesday in wake of U.S. sanctions on Venezuela‘s PDVSA


By Myra P. Saefong / MarketWatch

SAN FRANCISCO
Petroleumworld 01 29 2019

Oil prices finished higher on Tuesday, getting a boost in the wake of the U.S. Treasury's decision to impose sanctions on Venezuela's state-owned oil firm, Petróleos de Venezuela SA.

Prices had settled at a two-week low during Monday's regular session, logging their deepest drop of the year so far, before the after-hours reversal.

The U.S. Treasury sanctioned Venezuela's oil firm , raising the risk of disruptions to oil supply from the South American nation, home to the world's largest oil reserves. Venezuela's oil firm is also known as PdVSA,

West Texas Intermediate crude for March delivery US:CLG9 added $1.32, or 2.5%, to settle at $53.31 a barrel. The contract had shaved 3.2%, to finish at $51.99 on the New York Mercantile Exchange Monday. March Brent crude LCOH9, +2.14%  rose $1.39, or 2.3%, to $61.32 a barrel. It fell 2.8% to $59.93 Monday on ICE Futures Europe.

Prices recouped much of the losses from the prior session, when both benchmark contracts ended Monday at their lowest since Jan. 14, according to FactSet data.

Analysts are still assessing the potential global-market impact of the U.S. actions toward Venezuela.

“The sanctions will deal a meaningful blow to the Maduro administration's cash flow, but the effects won't be as harsh as the United States expects,” said Rystad Energy analyst Paola Rodriguez-Masiu.

“Administration officials reportedly said the sanctions would result in more than $11 billion in export losses for Venezuela over the next year, but I believe this figure will be substantially lower,” said Rodriguez-Masiu, a native Venezuelan who coordinates Rystad Energy's global refinery and infrastructure data. “The oil that Venezuela currently exports to the U.S. will be diverted to other countries and sold at lower prices. For countries like China and India, yesterday's news was akin to Black Monday. They will be able to pick up these oil volumes at great discounts.”

Read: Here's what Venezuela turmoil means for oil prices

Self-proclaimed “interim president” Juan Guaido is the biggest challenge to strongman Nicolás Maduro's government in years. Guaido has urged the country's powerful military forces to defect, promising amnesty.

Meanwhile, trade tensions between the U.S. and China continue to hang over energy trading, raising expectations for a slowdown in energy demand. China triggered the legal process for the World Trade Organization to hear its challenge to U.S. tariffs imposed on $234 billion of goods, according to a report from Reuters this week . Trade negotiations between senior officials from the two nations resume this week in Washington.

In other related news, Saudi Arabia plans to pump about 10.1 million barrels of oil a day in February— well below the country's voluntary limit of 10.33 million barrels a day, Saudi energy minister Khalid al-Falih said in an interview with Bloomberg Television .

Over in the U.S., a weekly report from the EIA due Wednesday is expected to show a rise of 3.1 million barrels in crude stockpiles, on average, according to a survey of analysts conducted by S&P Global Platts. The survey also showed expectations for a rise of 2.8 million barrels in gasoline supplies, but distillates were expected to fall by 2 million barrels.

On Nymex Tuesday, February gasoline RBG9, +0.05%  added 1.3% to $1.351 a gallon and February heating oil HOG9, -0.09%  rose 3.3% to $1.898 a gallon.

February natural gas NGG19, +0.82%  gave up earlier losses to gain 1.3% to $2.95 per million British thermal units on its expiration day. The contract tumbled 8.4% Monday to $2.911 per million British thermal units—the lowest since September, but ended last week about 8.7% lower. It's been subject to volatile swings, amid extreme weather conditions. March natural gas NGH19, +0.14% which is now front-month contract, added 1% to $2.903.

About 250 million people — or 77% of the continental U.S. population — will face temperatures below freezing this week. Of those, 90 million will endure temperatures below zero and a staggering 25 million Americans could see temperatures fall to 20 degrees below, according to meteorologist Ryan Maue of weathermodels.com.Temperatures will plunge to 20-40 degrees below zero between Tuesday and Thursday in the Upper Midwest and Great Lakes.

Read: Here's how investors can take advantage of ‘opportunity' in natural gas

“Although the West and Midwest regions are predicted to experience colder temperatures, the market is likely giving heavier weight to the Eastern forecast, as the Northeast is a main heating demand center,” said Christin Redmond, global commodity analyst at Schneider Electric. The Eastern U.S. will see above average temperatures over the coming week.”

 


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Story by Myra P. Saefong from MarketWatch.
reuters.com
01 29 2019 20:34 GMT


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