Crude prices jump on possibility of wider U.S. Sanctions on Venezuela

By Azernews

By Sara Israfilbaova

Crude prices continue to rise in the world markets amid reports of possible expansion of sanctions by the U.S. against Venezuela.

Brent crude futures up 0.15 percent, at $2.8 per barrel, while U.S. West Texas Intermediate (WTI) crude futures were at $50.27 per barrel, up 0.2 percent on August 1, according to RIA Novosti.

A day earlier oil prices exceeded the maximum for two months following a decrease in the U.S. inventories, as well as the threat of sanctions against OPEC-member Venezuela.

Washington imposed sanctions on Venezuelan President Nicolas after Sunday's vote creating a new legislative superbody with the power to dissolve state institutions such as the opposition-run Congress.  Many countries denounced the vote while Washington called it a "sham."

But, traders and analysts said the sanctions, in their current state, would not affect oil flows to or from Venezuela.

"The latest sanctions are more symbolic than anything else, as the oil sector remains exempted," said UBS oil analyst Giovanni Staunovo.

Reuters reported that Washington is still considering broader sanctions against Venezuela’s oil industry, which could prove devastating for a country which is already in a state of economic free fall.

The targeted sanctions against Maduro “send a loud message that the US is prepared to get tough,” said Michael Shifter, president of the Inter-American Dialogue, a Washington-based think tank.

The sanction package that is being considered in Washington may include a ban on access to the U.S. banking system for the Venezuelan state-owned oil and natural gas company PDVSA, sources familiar with the White House discussion told CNBC.

The Commerzbank survey reported that Venezuela is the largest oil supplier to the U.S. The imposition of sanctions on the Venezuelan oil industry can create a deficit of heavy oil for the U.S. refineries.

The country now sells more than 700,000 barrels of oil a day to the United States, out of a total production of roughly two million barrels a day, or just over 2 percent of world production. Energy experts say Venezuela could eventually replace the American market, by exporting more heavy oil to China and India, though at a discount. 

Data from the U.S. Department of Energy on the average daily production in the country, published on July 31 also hold back the growth of world oil prices. The extraction of "black gold" in the U.S. rose by 3.6 percent in May in annual terms - to 9,169 barrels per day. Growth in monthly terms was fixed at 0.6 percent.

Moreover, investors consider reports that the Technical Committee of OPEC+ experts will hold meetings in Abu Dhabi on August 7-8 with some participants of the agreement on oil production reduction to discuss the fulfillment of their obligations under the deal.

OPEC and other major producers made a deal in December 2016 to remove 1.8 million barrels a day from the market.  The cartel and its allies, trying to reduce a crude glut, agreed in May to extend the supply cut through March 2018.