Venezuela sanctions leave oil market short of heavy crude

Crude Oil

China's crude oil imports in January rose 4.8 percent from a year earlier, customs data showed on Thursday, to an average of 10.03 million barrels per day (bpd), the third straight month that imports have exceeded the 10 million bpd mark.

While yesterday's jawboning from OPEC continues to keep the oil complex bid.

On the broader picture, the ongoing OPEC+ agreement to curb oil production, U.S. sanctions against Venezuelan and Iranian oil exports and the so-called "Saudi Put" should keep a firm floor under crude prices.

While US crude production is expected to grow by an amount that exceeds Venezuela's current output, the IEA warned that quantity is not the only important issue.

Oil prices inched up on Thursday, buoyed by hopes that potential progress in the latest Sino-U.S. tariff talks would improve the global economic outlook.

The IEA noted that new USA sanctions announced in January on Venezuela's state oil company PDVSA have not so far caused market jitters.

The biggest prize in the contest for control of Venezuela and its state oil company Petroleos de Venezuela SA lies more than 2,000 miles northwest of Caracas.

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Output has gone into free fall as the country's isolation has increased, shrinking from 2.4 million bpd in 2016 to 2.0 million bpd in 2017 and 1.5 million bpd in 2018, according to the Joint Organisations Data Initiative.

Climbing U.S. oil stockpiles weighed on prices. On Monday, April Brent crude futures dropped around one percent, reaching minimum since January 29.

Sanctions announced last month prohibit USA corporations and persons from financial transactions with state-owned oil company PDVSA.

World oil markets have been on a rollercoaster ride in recent months, with the OPEC+ group agreeing to cut back production again from January in order to reverse a slump in oil prices on abundant production and worries about slower global growth.

And while OPEC and its allies, including Russian Federation, withhold supply, U.S. output is expected to rise further, with the Energy Information Administration saying on Tuesday that United States crude production is expected to reach 13.2 million bpd by 2020.

If refiners are unable to source enough heavy and extra heavy crude, they will buy the next best alternative, in this case medium density crudes, so the impact of sanctions is rippling through the entire oil market.

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