Oil prices steady as US sanctions Venezuela and the economy remains gloomy

London — Oil prices held steady on Wednesday, boosted by concerns about supply disruptions following US sanctions on Venezuela’s oil industry but pegged back by a bleak outlook for the global economy.

US West Texas Intermediate (WTI) crude futures were at $53.34 a barrel at 9.50am GMT, up 3c or 0.06%. International Brent crude oil futures were at $61.45 a barrel, up 13c or 0.21%.

Washington announced export sanctions against state-owned oil producer PDVSA on Monday, limiting transactions between US companies that do business with the firm.

“The sanctions so far have been mostly disruptive for refiners on the US Gulf Coast, who are being forced to seek alternative heavy crude supplies, and have stepped up purchases from Canada,” said Vandana Hari of energy consultancy Vanda Insights.

The sanctions aim to freeze sale proceeds from PDVSA’s exports of roughly 500,000 barrels per day (bpd) of crude to the US.

World oil futures rose by more than 2% on Tuesday, but the market has not seen panic buying as a result of the US decision to target Venezuela’s oil output. Its output was already near seven-decade lows and the sanctions affect Venezuelan supply only to the US.

“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 US 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.”

Venezuelan President Nicolás Maduro said on Wednesday that he was ready for talks with the opposition although he ruled out snap elections the opposition is demanding.

Beyond Venezuela, analysts pointed to economic weakness as countering supply-side troubles. “Another major risk event for the oil market will be US-China trade talks that get underway [on Wednesday],” said Stephen Brennock, analyst at London brokerage PVM Oil. “Both sides are now faced with a ‘now or never’ moment in settling their trade spat.”

Global economic growth is slowing amid a trade dispute between the US 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. The two sides have slapped hefty import tariffs on each other’s goods.

Reuters