Energy market participants may be able to adjust to United States sanctions against crude industry of Venezuela, the IEA said in its closely-watched report on Tuesday.
The report comes at a time when tensions in Venezuela are reaching boiling point, with the oil-rich, but cash-poor, country in the midst of the Western Hemisphere’s worst humanitarian crisis in recent memory.
United States President Donald Trump’s administration imposed targeted crude sanctions on Caracas late last month. The surprise move was designed to bar President Nicolas Maduro’s access to oil revenue that has helped his embattled administration remain in power.
“The imposition of sanctions by the United States against Venezuela’s state oil company Petroleos de Venezuela (PDVSA) is another reminder of the huge importance for oil of political events,” the Paris-based IEA said Tuesday.
“Even so, headline benchmark crude oil prices have hardly changed on news of the sanctions. This is because, in terms of crude oil quantity, markets may be able to adjust after initial logistical dislocations,” the group added.
International benchmark Brent crude traded at around $62.90 Tuesday morning, up 0.8 percent, while U.S. West Texas Intermediate (WTI) stood at $53.46, more than 0.6 percent higher.
Since plummeting more than 40 percent between early October and late December last year, Brent crude has gradually pared some of its losses.
Supply issues in OPEC-member Venezuela and OPEC-led production cuts from the start of the year have bolstered crude futures in recent weeks.
The IEA said oil prices had not increased “alarmingly” since U.S. sanctions were imposed on Venezuela because the market is still working off the surpluses built up in the second half of 2018 — when global supply was estimated to have exceeded demand by 1.3 million barrels per day (b/d).
“Crude oil quality is another issue, and, in the wider context of supply in the early part of 2019, it is even more important,” the IEA said.