Oil futures rose Friday for a second straight session, supported by supply concerns tied to Venezuela, but a hefty weekly rise in U.S. crude supplies helped to keep prices lower for the week.
Market attention remained fixed on Venezuela, with all eyes on next steps for popular opposition leader Juan Guiado, while the top military brass reupped its allegiance to embattled President Nicolás Maduro.
In Friday dealings, West Texas Intermediate crude for March delivery US:CLG9 rose 49 cents, or 0.9%, to $53.62 a barrel on the New York Mercantile Exchange. The contract was down 0.8% for the week.
The U.S. threatened to impose sanctions on Venezuela’s oil industry that could further hobble the country’s exports. The U.S. imported about 17.7 million barrels of crude oil and petroleum products from Venezuela in October 2018, according to the Energy Information Administration.
Developments in Venezuela take on an even greater importance for the oil market considering that the country holds the rotating presidency of OPEC this year, analysts stressed.
Meanwhile, the Energy Information Administration reported Thursday that domestic crude supplies climbed by 8 million barrels for the week ended Jan. 18, a two-month high. That was contrary to expectations for a fall of 600,000 barrels expected by analysts polled by S&P Global Platts.
With the build, U.S. crude stockpiles are now about 8% above the year-ago level and 2.8% above the five-year norm, analysts at PVM Oil Associates said in a Friday note.
Gasoline stockpiles rose by 4.1 million barrels last week, while distillate stockpiles edged down by 600,000 barrels, according to the EIA. The S&P Global Platts survey had shown expectations for supply increases of 2.9 million barrels for gasoline and 900,000 barrels in distillates.
On Nymex, February heating oil HOG9, +0.32% was up 0.2% at $1.889 a gallon, with prices trading more than 1% lower on the week, while February gasoline RBG9, +0.16% added less than 0.1% to $1.388 a gallon, poised for weekly loss of over 4%.
Meanwhile, data from Baker Hughes BHGE, +2.04% on Friday showed that the number of active U.S. rigs drilling for oil, which offers a hint on future production activity, rose by 10 to 862 this week. That followed a hefty drop of 21 in the oil-rig count a week earlier.
The EIA’s annual energy outlook report released Thursday said U.S. crude oil production is expected to continue to set annual records through the mid-2020s and will remain greater than 14.0 million barrels per day through 2040. The report also said that U.S. will become a net energy exporter by 2020 as U.S. crude production increases and domestic consumption of petroleum products decreases.
“Supply-side risks could sabotage attempts by OPEC+ to rebalance the oil markets, which may test the resolve of year-to-date price gains in WTI oil,” said Lukman Otunuga, research analyst at FXTM.
Year to date, WTI oil has climbed by roughly 17%. The Organization of the Petroleum Exporting Countries and its allies agreed late in 2018 to collectively hold back crude output by 1.2 million barrels a day for the first half of 2019 to limit a supply glut and boost prices.
March Brent crude LCOH9, +0.85% rose 39 cents, or 0.6%, to $61.48 on ICE Futures Europe, with prices looking at a weekly loss of about 2%.
”Military support for Maduro is likely to tip the balance of power in his favor, despite international support for Guiado,” said Jasper Lawler, head of research for London Capital Group, in a note.
“A dramatic escalation in tensions has raised fears that the U.S. could impose sanctions on Venezuelan oil, threatening to complicate OPEC’s job of balancing global oil supplies,” Lawler said. “With sanctions already on Iran, further sanctions applied to Venezuela could see the price of oil shoot up very quickly as supply tightens further.”
A defiant Maduro called home all Venezuelan diplomats from the U.S. and closed its embassy, a day after ordering all U.S. diplomats out of the country by the weekend. The Trump administration says Maduro’s order isn’t legal because the U.S. no longer recognizes him as Venezuela’s legitimate leader.
In other energy trading, February natural gas NGG19, +2.68% rose 1.8% to $3.153 per million British thermal units—still trading about 9.3% lower for the week. The EIA reported Thursday that domestic supplies of natural gas fell by 163 billion cubic feet for the week ended Jan. 18.
