Light, sweet crude oil prices rose on the New York market Jan. 25 as did Brent crude oil prices in London while analysts contemplated Venezeula’s geopolitics and its contribution to world oil markets given an ongoing presidential power struggle in that nation.
Ole Hansen, SaxoBank Research head of commodity strategy, said Venezuela’s deepening economic crisis supported oil prices for the week ended Jan. 25. US crude futures rose the most since November 2018 while US gasoline inventories climbed to record levels.
“The prospect of a major disruption in Venezuela combined with the risk of the US government ordering a halt to imports from Venezuela helped narrow West Texas Intermediate’s discount to Brent crude oil,” Hansen said. “The prices of Mexican and Canadian oil, two alternatives to Venezuela’s heavy crude oil, both outperformed WTI crude oil.”
Fereidun Fesharaki, founder and chairman of FGE, told Bloomberg in an interview that oil markets remain flush with crude supplies despite chronically dropping production in Venezuela.
Aside from Venezuela, Fesharaki believes a supply-demand rebalance already is happening through production cuts by the Organization of Petroleum Exporting Countries and some non-OPEC countries, including Russia. The December 2018 agreement calls for cuts of 1.2 million b/d in the first half of 2019.
“The trend is set without geopolitics,” Fesharaki said. He believes oil supply-demand will rebalance in 3-6 months depending on the rate of OPEC and non-OPEC compliance with the production cuts.
When asked by Bloomberg about oil prices, Fesharaki expects US crude oil futures of $55-60/bbl and Brent oil prices of $65-70/bbl during 2019.
He also said the threat of US oil sanctions against Venezuela “takes a back page” to US President Donald Trump recognizing Venezuela opposition leader Juan Guaido as interim president while Nicolas Maduro also claims he remains the legitimate president of Venezuela.
US officials have threatened to impose sanctions on US imports of about 500,000 b/d of very heavy oil from Venezuela. Fesharaki said US refineries “cannot easily find” the same quality crude oil elsewhere.
Yet, a drop of 300,000-400,000 b/d is not enough to sway the world oil supply-demand scenario, he said.
On Jan. 23, Trump acknowledged Guaido as interim president. On Jan. 25, a new special envoy, retired senior diplomat Elliott Abrams, was named to lead what US Sec. of State Mike Pompeo called “our efforts to restore democracy in Venezuela.”
Energy prices
The March contract for light, sweet crude oil on the New York Mercantile Exchange gained 56¢ to settle at $53.69/bbl while the April contract added 56¢ to settle at $53.98/bbl.
NYMEX natural gas for February rose nearly 8¢ to close at a rounded $3.18/MMbtu on Jan. 25.
Ultralow-sulfur diesel for February rose less than a penny to $1.89/gal. The NYMEX reformulated gasoline blendstock for February rose less than a penny to remain at a rounded $1.39/gal.
Brent crude for March gained 55¢ to $61.64/bbl on London’s Intercontinental Exchange while the April contract gained 43¢ to settle at $61.59/bbl. The gas oil contract for February increased 75¢ to $568/tonne on Jan. 25.
The average price for the OPEC basket of crudes was $60.90/bbl on Jan. 25, up 68¢.
Contact Paula Dittrick at [email protected].
