Oil rose on Wednesday as concerns about supply disruptions following U.S. sanctions on Venezuela’s oil industry outweighed downward pressure from a darkening outlook for the global economy.
U.S. West Texas Intermediate (WTI) crude futures were at $53.43 per barrel at 0333 GMT, 12 cents, or 0.2 percent, above their last settlement.
International Brent crude oil futures rose 17 cents, or 0.3 percent, to $61.49 per barrel.
The gains followed a 2-percent price jump in the previous session, when markets first digested the U.S. sanctions on Venezuela’s oil exports.
Washington on Monday announced export sanctions against Venezuela’s state-owned oil firm PDVSA, limiting transactions between U.S. companies that do business with Venezuela through purchases of crude oil and sales of refined products.
“The sanctions so far have been mostly disruptive for refiners on the U.S. Gulf Coast, who are being forced to seek alternative heavy crude supplies, and have stepped up purchases from Canada,” said Vandana Hari of Vanda Insights, an energy consultancy.
She added, however, that Canadian oil exports would be “constrained by pipeline capacity bottlenecks.
The sanctions aim to freeze sale proceeds from PDVSA’s exports of roughly 500,000 barrels per day (bpd) of crude oil to the United States.
Although the move pushed up oil prices, markets appeared relatively relaxed as the sanctions only affect Venezuelan supply to the United States.
“The (Venezuelan) export volumes will not be eliminated from the market, but rather rerouted to other countries,” said Paola Rodriguez-Masiu, an analyst at consultancy Rystad Energy.
With the United States dropping out as a customer for Venezuelan oil, she added that “China and India … will be able to pick up these oil volumes at great discounts.”
Other analysts also pointed to economic weakness as countering supply-side concerns such as the voluntary supply restraint by the Organization of the Petroleum Exporting Countries (OPEC) aimed at tightening the market.
“The Venezuelan political crisis as well as a Saudi pledge to lower output further should have boosted crude oil, but pulling in the opposite direction are heightened concerns about global growth, particularly that of China,” said Ole Hansen, head of commodity strategy at Denmark’s Saxo Bank.
Global economic growth and fuel consumption are expected to slow this year amid a trade dispute between the United States and China, the world’s two biggest economies.
Officials from Washington and Beijing are set to launch a new round of trade talks on Wednesday amid differences over U.S. demands for structural economic reforms from Beijing that will make it difficult to reach a deal before a U.S. tariff hike on March 2 that has been announced if no agreement is reached.
“The outcome of the meetings will also be the main influencer of sentiment in the oil markets,” Hari said.