Oil edges up as US threatens sanctions on Venezuela

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

But fresh data on surging US fuel stocks and worries about US-China trade talks weighed on prices.

Brent crude oil futures were at $61.17 a barrel at 9.55am GMT, up 8c, or 0.13%. Earlier on Friday, the international benchmark crude rose as high as $61.92. Brent, however, has shed about 2.4% since the start of trade on Monday and is on track to post its first week of losses in four weeks.

US West Texas Intermediate (WTI) crude futures were at $53.34 a barrel, up 21c, or 0.4%.

Amid violent street protests, Venezuela’s opposition leader Juan Guaidó declared himself interim president this week, winning recognition from Washington and parts of Latin America.

Nicolás Maduro, the country’s leader since 2013, responded by breaking relations with the US. “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.

RBC Europe predicted that sanctions could nearly double projected output shortfalls from the troubled exporter.  “Venezuelan production will decline by an additional 300,000 barrels per day (bpd) to 500,000 this year but such punitive measures could expand that outage by several hundred thousand barrels.”

Global oil markets are still well supplied, however, thanks in part to surging output in the US.

Record US production would likely offset any short-term disruptions to Venezuelan supply due to possible US sanctions, Britain’s Barclays said in a note. The bank cut its 2019 average Brent forecast to $70 a barrel, from $72 previously.

The output surge has swollen US fuel stocks, and crude inventories rose by 8-million barrels last week, according to official data released on Thursday. But demand may start to stutter because of a global economic slowdown, which is likely to dent fuel consumption.

A trade dispute between the US and China and tightening financial conditions around the world have hurt manufacturing activity in most economies and dragged China’s growth last year to the weakest in nearly 30 years.

According to Reuters polls of hundreds of economists worldwide, a synchronised global economic slowdown is underway and would deepen if the US-China trade war escalated.

Reuters