Oil climbs on Venezuelan crisis despite surging USA supply

US oil up 1% on Venezuela turmoil, but hefty stock build weighs

US oil up 1% on Venezuela turmoil, but hefty stock build weighs

In October 2018, the United States imported about 17.7 million barrels of crude oil and petroleum, according to the Energy Information Administration. This week, things got worse.

The long-brewing crisis in Venezuela reached a head this week as the United States, Canada and other countries in the hemisphere recognized opposition leader Juan Guaido as interim president following a move by the country's National Assembly to have him replace Nicolas Maduro. The issues in the country have also put Washington and Moscow on edge with Russian Federation warning the United States not to intervene. Gasoline stocks climbed for an eighth consecutive week in the week to January 18, by 4.1 million barrels to a record 259.6 million barrels, the U.S. Energy Information Administration (EIA) said in a weekly report on Thursday.

WTI met some fresh buying interest earlier in the day on rumours that the USA could impose sanctions on Venezuelan oil exports in response to the rising social turmoil in the Caribbean country.

Still, the long-term trend is a declining dependence on Venezuelan oil.

According to the EIA, U.S. crude inventories surprisingly surged last week, however, trader reaction was muted due to concerns over Venezuela.

March Brent crude was at $60.94 a barrel on ICE Futures Europe, down 20 cents, or 0.33 percent.

Speculative buyers are in control early Friday in anticipation of an escalation of the economic and political turmoil in Venezuela.

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Both Brent and WTI are both backed by light, sweet crudes, and are not directly linked to Venezuelan oil.

Weighing on oil futures, U.S. crude inventories USOILC=ECI sharply rose by 8 million barrels last week, the Energy Information Administration said on Thursday, versus forecasts for a decline of 42,000 barrels.

In the coming weeks, traders are expected to pay a close eye on US threat of sanctions on Venezuela, which would lead to a tighter market.

White House officials earlier this month warned US refiners to seek alternative sources of heavy crude. Valero and Citgo are among the largest importers of Venezuelan crude.

"It's a function of people keeping an eye on supply concerns out of Venezuela", said Marshall Steeves, energy markets analyst at Informa Economics IG in NY.

Venezuela is very reliant on the US for its oil revenue. However, this bullish view is eclipsed by the above mentioned possibility of a slowdown in the global economy and fears of a supply glut on the back of increasing United States oil production. One proposal would see Washington declare that any payment to Venezuela in return for oil must go to the new government, or perhaps some form of humanitarian account to help feed the country's starving people.

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