Oil Prices Tread Water Ahead of U.S. Rig Count Data

Investing.com – Record gasoline stockpiles and the likelihood of Venezuela sanctions are the knowns in the oil market. What’s not known yet is whether U.S. rigs took another tumble this week, reacting belatedly to the fourth-quarter crash in oil prices.

New York-traded West Texas Intermediate and London’s Brent crude were up slightly on Friday, awaiting the weekly rig count to be published by oil services firm Baker Hughes at around 1:00 PM ET (17:00 GMT).

rose by 23 cents, or 0.4%, to $53.36 per barrel by 11:05 AM ET.

, the global oil benchmark, climbed 17 cents, or 0.3%, to $61.26

For the week, WTI was up about 1 % while Brent showed a decline of more than 2%.

Oil prices have been mixed this week, initially tumbling on weak Chinese and global data and concerns about the U.S. oil stockpiles, before being supported by fears that the U.S. could slap sanctions against Venezuelan oil in retaliation against President Nicholas Maduro’s decision to sever diplomatic ties with Washington.

The rig count from Baker Hughes will be crucial to determining whether output of U.S. shale crude, which has been responsible for two supply gluts in global oil markets the past four years, is slowing (at least in the near term).

Last week’s drop of 21 U.S. oil rigs took traders by surprise, accelerating prices gains in a market already charging higher on OPEC’s aggressive campaign to publicize its production cuts. But while last week’s slide in rigs was the sharpest in nearly three years, the 852 oil rigs still deployed remains higher than the year-ago level of 747.

In its weekly supply-demand update published on Thursday, 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. Analysts had only expected a gasoline build of 2.66 million barrels last week.

rose by 7.97 million barrels in the week to Jan. 18, compared to forecasts for a stockpile draw of 0.042 million barrels, the EIA said.

, which produce diesel and other commercial fuels, decreased by 0.62 million barrels, compared to forecasts for a decline of 0.23 million.

As for Venezuela, the U.S. has drafted a slate of potential restrictions on the Latin American nation’s crude exports, but hasn’t decided whether to deploy them, said people familiar with the matter. The crisis in Caracas could expedite OPEC’s goals of balancing the supply-demand in oil and boosting crude prices or risk market havoc.

But analysts doubt the Trump administration would go ahead with the sanctions as they could starve U.S. refineries of Venezuela’s sour-grade oil, which is crucial for producing diesel, jet and other commercial fuels, compared to WTI’s sweet grade meant for gasoline.

Prices of crude and all fuels could also surge as a result of the sanctions, something President Donald Trump would particularly dislike, analysts say.

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