Oil Price Rises to $61 as US Imposes Sanctions on Venezuela

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Ejiofor Alike with agency reports

Crude oil prices rose yesterday after Washington imposed sanctions on state-owned Venezuelan oil company, PDVSA, in a move likely to curb the country’s crude exports.

However, the gains from this curb in oil supply from Venezuela could be capped by abundant supply and signs of a slowing Chinese economy.

But the upward momentum in the global benchmarks gathered pace yesterday afternoon trading as the price of the international Brent crude oil rose by $1.31 at $61.24 per barrel and on track for its biggest monthly rise since April 2016.

Also, United States West Texas Intermediate (WTI) crude rose by $1.32 at $53.31 per barrel.

Venezuela has the world’s biggest proven oil reserves, but its potential has not been realised fully because of a lack of investment.

The country is also a member of the Organisation of the Petroleum Exporting Countries (OPEC), which is implementing a supply cut deal to shore up prices.

Reuters reported that Venezuela’s exports fell to little more than 1 million barrels per day (bpd) in 2018 from 1.6 million bpd in 2017

The United States has been the biggest buyer of Venezuelan oil despite their political differences, taking about half of the country’s export volumes, followed by India and China.

President Donald Trump administration’s sanctions on Venezuelan oil, aimed at driving President Nicolas Maduro from power, sent shockwaves around the world yesterday, triggering higher global oil prices and angry responses from China and Russia.

The White House imposed restrictions on Venezuelan state-oil company PDVSA on Monday with the goal of curbing some $11 billion of crude exports from the OPEC member to the United States this year.

The Kremlin condemned the sanctions as illegal interference, while China said they would lead to suffering for which Washington would bear responsibility.

Both countries have lent billions of dollars to Venezuela and are concerned about new stress on debt payments.

Venezuela has sunk into economic and political turmoil under Maduro’s socialist government, with inflation seen rising to 10 million percent this year, chronic food shortages, protests and mass emigration.

Maduro, a 56-year-old former union leader, was sworn in for a disputed second term this month after being re-elected last year in a vote denounced as illegitimate by the opposition and critics abroad.

Opposition leader Juan Guaido, 35, proclaimed himself interim president last week and has been recognised by Washington and several Western countries as Venezuela’s rightful leader. Russia still backs Maduro.

Guaido said Venezuela can achieve a peaceful transition from Maduro and eventually hold free elections, speaking in an interview with CNN that aired on Tuesday.

It is estimated that Venezuelan exports will drop by about 500,000 barrels per day under current conditions.

Meanwhile, Libya’s biggest oilfield, El Sharara, will remain shut until departure of an armed group occupying the site, the head of country’s National Oil Corporation said.

However, despite these threats to the supply of oil to the international market, the global oil supply remains high, largely because of a more than two million bpd increase in United States crude oil production last year to a record 11.9 million bpd.

There are also concerns in the oil industry that crude demand could stutter.