Investing.com – Oil is getting some help after all from uncertainties over Venezuela, although gains are being limited by concerns over surging stockpiles of U.S. crude of late.
New York-traded West Texas Intermediate crude and London’s Brent oil were up by more than 2% each, recovering part of Monday’s 3% drop on worries over slowing Chinese and global growth.
rose by $1.40, or 2.7%, to $53.39 per barrel by 12:36 PM ET (17:36 GMT).
, the global oil benchmark, gained $1.57, or 2.6%, to $61.38.
The Trump administration announced sanctions against Venezuela’s state-owned oil firm PDVSA after market hours on Monday, banning the compnay from shipping crude into the United States with immediate effect .
On their own, the sanctions lend a geopolitical premium to oil as Venezuelan President Nicholas Maduro battles for authority with opposition leader Juan Guaido, whom Washington recognizes as Caracas’ new leader. But there are various mitigating factors to the action too.
For instance, the restrictions by Washington on PDVSA cover only exports to the United States. That leaves the Venezuelan company, that is still under Maduro’s control, to do business with any other nation.
Venezuela produces a sulphur-laden type of heavy crude that refineries in the U.S. Gulf Coast of Mexico need for turning into diesel and other important transportation fuels. While those refiners would certainly feel a squeeze from the ban on PDVSA imports, they could also source Iraqi, Colombian and Mexican alternatives to the so-called sour crude from Venezeula.
“It’s my view that oil will always find a way into the market regardless of what the U.S. does,” said Scott Shelton, energy futures broker and commentator at ICAP (LON:) in Durham, N.C.
Therefore, “oil traders aren’t sure” about how to read the Venezuelan sitiation and “the price action tells me the same”, said Shelton, warning investors to brace for volatility.
Traders were also hedging their positions ahead of weekly supply-demand data on oil due from the U.S. government on Wednesday.
In the previous week to Jan. 18, the U.S. Energy Information Administration announced a larger-than-expected build of 4.05 million barrels in to a record high 259.6 million barrels.
rose by 7.97 million barrels while , which produce diesel and other commercial fuels, decreased by 0.62 million barrels.
The EIA will be releasing its dataset for the week ended Jan. 25 at 10:30 AM ET (15:30 GMt) on Wednesday. The American Petroleum Institute, an industry group, will Issue at 4:30 PM on Tuesday a snapshot of what the EIA numbers could be.
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