But U.S. President Donald Trump threatened on Tuesday to place "major tariffs" on Chinese goods imported into the United States if his administration didn't reach a desirable deal with Beijing. However, traders somewhat weighed down this scenario against the backdrop of the solid performance in U.S. oil output, which should be more than enough to offset occasional supply disruptions.
"The evolving situation in Venezuela appears capable of delaying our expected test of $50 support".
"It's really the first quarter that's the big concern among investors right now", Matthew Blair, an analyst at Tudor Pickering Holt & Co., said Thursday in a phone interview. Production of heavy crude in Mexico has been declining, and although there is a strong supply in Canada, there are challenges to getting that crude to the Gulf Coast refineries.
'This lower oil price environment may give Trump more cushion to implement these sanctions.
The driver of Friday's trading activity was said to be the US signalling that it may impose sanctions on Venezuelan exports after recognizing opposition leader Juan Guaido as interim president this week, prompting president Nicholas Maduro to cut ties with Washington.More news: Buckle Up: Memphis listening to Trade Offers for Marc and Mike
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Rising crude output in the world's top three producing countries - the U.S., Russia, and Saudi Arabia - would also add to the glut of supply in the global market and keep downward pressure on prices, they added. That's because Venezuela's oil shipments to China and Russian Federation are usually taken as repayment for billions of dollars in debts. Venezuela holds the group's rotating presidency this year, which means the nation's oil minister and PDVSA president Manuel Quevedo is OPEC's sitting president for 2019.
"The potential is that the U.S.is starting to put things in motion and the risk for an acceleration in the decline in production from Venezuela is increasing", Petromatrix strategist Olivier Jakob said. At the same time, a scarcity of heavy crude is making it more expensive and less lucrative to process.
United States sanctions on Venezuela could increase the cost of heavy crude, dealing a setback to American refineries, analysts warned.
In a news conference, Guaido, who declared himself acting president this week, said he's preparing to dismiss the head of state-run oil company Petroleos de Venezuela SA as well as the board of its Houston-based refining arm, Citgo Petroleum Corp., taking on two of the power centers that help to bankroll the Maduro government.
Other industries that rely heavily on oil may feel impacts. Even if Maduro's government is replaced, "the road back for Venezuela will be extremely arduous given the depths of the economic and humanitarian crisis", Tran and fellow RBC analyst Helima Croft wrote in a note.