(RTTNews) – Crude oil fell today on emerging supply side concerns following US efforts to seize control of Venezuela’s oil wealth, extending yesterday’s decline.
WTI crude oil for February delivery was last seen trading at $56.02 per barrel, down $1.11 (or 1.94%).
On January 3, US forces entered Venezuela, airlifted Venezuelan President Nicolas Maduro and his wife to the United States and put them on trial.
US President Donald Trump, who ordered the high-intensity raid and supervised the entire operation, soon announced that the US would “run” Venezuela and that the US would have access to the country’s oil wealth.
Currently, an interim government is run by Vice President Delcy Rodriguez.
Yesterday, Trump announced that Venezuela would transfer 30 million to 50 million barrels of “extra-heavy crude” to the US. Trump plans to sell $3 billion worth of Venezuelan crude currently stored in tankers and reserve facilities.
Venezuela will reportedly continue to supply beyond the initial 50 million barrels.
Since this could meet the purchasing needs of the world’s largest oil consumer, supply concerns are rising. Additionally, China, which accounts for about 80% of Venezuela’s crude oil exports, is facing disruption in its imports.
After demanding “full access” to Venezuelan oil for US oil companies, Trump is set to meet with high-level executives from ExxonMobil, Chevron and ConocoPhillips to discuss his plans.
However, energy experts are skeptical of Trump’s plan, as they believe that reviving Venezuela’s depleted oil infrastructure would require billions of dollars of investment and a period of more than 10 years.
Venezuela’s three main partners, Russia, China and Iran, have condemned the US attacks.
US forces also seized the M/V Bella 1 for “sanctions violations” after a weeks-long chase when the tanker veered off into the open Atlantic off Venezuela.
Yesterday, data from the American Petroleum Institute showed that US crude oil inventories fell by 2.8 million barrels in the week ended January 2, a reversal from a build of 1.7 million barrels the previous week.
For the week ending Jan. 2, U.S. crude oil inventories fell by 3.831 million barrels, according to the U.S. Energy Information Administration. Stocks at the Cushing, Oklahoma delivery hub rose by 728,000 barrels.
For the same period, gasoline inventories increased by 7,702,000 barrels, distillate inventories increased by 5,594,000 barrels, and heating oil inventories increased by 672,000 barrels.
Oil majors Chevron and Quantum Energy have joined forces to jointly bid for Russian oil major Lukoil’s international assets, according to a report in the Financial Times. The properties were on the market after the US imposed sanctions on Lukoil.
Following a meeting in Paris, France, Ukraine’s European allies have stood united in providing security guarantees to Ukraine (a plan supported by the US), if Russia agrees to a US-written ceasefire plan to end the Russia-Ukraine war.
Since Russian oil exports are currently sanctioned by the US and the West, the move is seen as progress, raising supply concerns.
The US Dollar Index was last seen trading at 98.66 today, up 0.08 (or 0.08%).
On the monetary front, the US Federal Reserve’s FOMC meeting is scheduled to be held on January 27-28, at the conclusion of which the central bank’s decision on interest rates will be announced.
Currently, CME Group’s FedWatch tool is indicating only an 11.6% chance of a quarter-point rate cut at the upcoming meeting.
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