"Sharp production cuts by OPEC+ have kept crude oil futures supported, however, as market reports indicate for a marked output reduction in Dec 2018", said Benjamin Lu, analyst at Phillip Futures. This week, things got worse. He had declared himself interim president, prompting socialist Nicolas Maduro, the country's leader since 2013, to break relations with the United States. The issues in the country have also put Washington and Moscow on edge with Russian Federation warning the United States not to intervene.
Oil closed higher for the third day in a row as a deal to reopen the USA government eased investor fears while political turmoil in Venezuela roiled one of the world's biggest suppliers of heavy crude.
Even without such measures, Venezuelan production is expected to continue to fall as debt-burdened PDVSA is unable to reinvest in its oil fields or infrastructure and has lost many of its most experienced technical staff under its military management.
Oil prices fell slightly during the week ending January 25, with the price of West Texas Intermediate (WTI) for March delivery down by 0.2 percent and Brent crude for March delivery down by 1.7 percent.
Over the longer term, a change in government in Venezuela could give the country an opportunity to rebuild its oil industry, so long as that change is accompanied by political stability, Mr. Monaldi said.
World leaders and top executives are meanwhile meeting in Davos, Switzerland, to discuss how to steer policy amid worries of slowing economic growth, damaging trade wars and Brexit.
The U.S. government could lessen the blow by phasing in restrictions on Venezuelan oil imports in a way that mirrors the trend U.S. refineries have already always been adjusting to, said John Auers, executive vice president of the refining consultancy Turner, Mason & Company.More news: Donald Trump delays State of the Union address over shutdown
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So far the response by WTI and Brent crude oil traders has been on the light but firm side.
Global oil markets are still well supplied, however, thanks in part to a spike in USA output.
Brent crude oil futures were at $61.62 a barrel, 53 cents above their last close.
A year ago, the U.S. government saw American crude production averaging 11.95 million barrels per day (bpd) in 2042.
White House officials earlier this month warned USA refiners to seek alternative sources of heavy crude. The primary importers of Venezuelan crude are Citgo, Valero Energy, and Chevron.
The American Fuel & Petrochemical Manufacturers, which represents 95 percent of the refining sector, has lobbied hard over the past two years against any attempts to restrict imports of Venezuelan oil.
"It's a function of people keeping an eye on supply concerns out of Venezuela", said Marshall Steeves, energy markets analyst at Informa Economics IG in NY. On the U.S. West Coast, Ecuador and Colombia ship crude oil. That's because Venezuela's oil shipments to China and Russian Federation are usually taken as repayment for billions of dollars in debts.