On Wednesday oil prices dipped amid a cloudy outlook for the global economy, but traders said declines were reined in by worries over disruptions to supply from U.S. sanctions on Venezuelan fuel exports.
U.S. West Texas Intermediate (WTI) crude futures were at $53.28 per barrel at 0255 GMT, 3 cents below their last settlement. International Brent crude oil futures were 6 cents below their last close, at $61.26 per barrel. That followed a 2-percent price jump the previous session, when markets first digested the United States sanctions on oil exports of Venezuela.
Washington on Monday announced export sanctions against Venezuela’s state-owned oil firm PDVSA, limiting transactions between U.S. companies that do business with Venezuela through purchases of crude oil and sales of refined products.
The sanctions, aim to freeze sale proceeds from PDVSA’s exports of roughly 500,000 barrels per day (bpd) of crude oil to the United States. They mark the toughest U.S. financial challenge yet to Venezuela’s embattled socialist president, Nicolas Maduro.
The step pushed up oil prices on Monday, but markets appeared more relaxed on Tuesday as the sanctions only impact Venezuelan supply to the United States.
“The (Venezuelan) export volumes will not be eliminated from the market, but rather rerouted to other countries,” said Paola Rodriguez-Masiu, an analyst at consultancy Rystad Energy.
With the United States dropping out as a customer for Venezuelan oil, she added that “China and India … will be able to pick up these oil volumes at great discounts”.
Other analysts also pointed to global economic weakness as countering supply-side concerns such as the voluntary supply restraint by the Organization of the Petroleum Exporting Countries (OPEC), which started late last year in a bid to tighten the market and prop up prices.
“The Venezuelan political crisis as well as a Saudi pledge to lower output further should have boosted crude oil, but pulling in the opposite direction are heightened concerns about global growth, particularly that of China,” said Ole Hansen, head of commodity strategy at Denmark’s Saxo Bank.
Global economic growth and fuel consumption are expected to slow this year amid a trade dispute between the United States and China, the world’s two biggest economies.
Officials from Washington and Beijing are set to launch a new round of trade talks on Wednesday amid deep differences over U.S. demands for structural economic reforms from Beijing that will make it difficult to reach a deal before a U.S. tariff hike on March 2 that has been announced if no agreement is reached.