Singapore: Oil rises in New York after jumping the most in more than a week on concerns that US sanctions on Venezuela will pose significant market disruption.
West Texas Intermediate futures rose 0.8 per cent after climbing 2.5 per cent on Tuesday. Venezuela is considering declaring force majeure with the US, a signal it may halt shipments, after the White House effectively banned American companies from purchasing its crude. A ban would mean that the 500,000 barrels shipped to the US every day by the Opec member would need to be re-directed elsewhere, Societe Generale SA said.
Oil is trading in its tightest range in four months as the Organisation of Petroleum Exporting Countries and its allies trim output to fight a global glut driven by record US production. The crisis in Venezuela has so far had only a limited impact on prices as it doesn’t change the overall supply and demand picture. Restoring the country’s output could take years, according to Jeff Currie, head of commodities research at Goldman Sachs Group Inc.
“Geopolitics have returned with a bang,” said Stephen Brennock, an analyst at PVM Oil Asscociates Ltd. in London. “This latest attempt to tighten the financial noose on embattled President Maduro will further cement Venezuela’s supply outlook to the downside.”
West Texas Intermediate crude for March delivery rose 40 cents to $53.71 a barrel on the New York Mercantile Exchange at 11:02am in London. The contract climbed $1.32, or 2.5 per cent, to close at $53.31 a barrel on Tuesday, the biggest advance since Jan. 18.
Brent for March settlement was 51 cents higher at $61.84 a barrel on the London-based ICE Futures Europe exchange. The contract increased $1.39 to $61.32 in the previous session. The global benchmark crude was at a $8.8 premium to WTI.
Investors are waiting to see how Venezuela responds to the latest American sanctions on Venezuela. If Caracas decides to declare force majeure on its crude exports to the US, almost 12 million barrels could be affected next month, according to a loading program seen by Bloomberg. Force majeure protects a party from liability if it can’t fulfil a contract for reasons beyond its control.
Traders are also waiting for any signs of progress in negotiations between the US and China to resolve a trade dispute.
The US and China sit down in Washington on Wednesday for two days of high-level discussions after Treasury Secretary Steven Mnuchin told the Fox Business Network that he expected “significant progress” in the talks.
The two sides are trying to resolve their trade differences before a March 1 deadline, when American tariffs on $200 billion of Chinese imports will increase to 25 per cent from 10 per cent. The talks come in the wake of lower-level discussions this month in Beijing, and after a period of market turmoil that has left both governments eager to publicly claim progress to calm investors’ nerves.