Oil prices rallied above 2 percent on Tuesday after the United States put sanctions on state-owned Venezuelan oil company PDVSA, a move likely to curtail the OPEC member`s crude exports and chip away at global oversupply worries.
International Brent crude oil futures were up $1.42 to $61.35 a barrel, or 2.4 percent, by 1:30 p.m. EST (1830 GMT). U.S. West Texas Intermediate (WTI) crude futures increased $1.32 to $53.31 a barrel, or 2.5 percent.
"The Venezuelan situation is obviously supportive," said Phil Flynn, an analyst at Price Futures Group in Chicago. "When you put the Venezuelan sanctions along with OPEC production cuts and more concerns about Libyan oil production...you see a market that is generally tightening."
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Venezuela is among the world`s largest heavy crude oil producers, and the United States has been its biggest client, taking about half the country`s export volumes, followed by India and China..
The Trump administration`s restrictions on Venezuelan crude, aimed at driving President Nicolas Maduro from power, stop short of banning U.S. companies from buying oil from the Latin American country. However, proceeds from such sales will be put in a "blocked account" that should deter PDVSA from shipping crude to the United States.
Venezuela`s exports have already fallen to little more than 1 million barrels per day (bpd) in 2018 from 1.6 million bpd in 2017, according to Refinitiv ship-tracking data and trade sources.
Petromatrix estimated that Venezuelan exports will drop by about 500,000 barrels per day under current conditions.
Additionally, Venezuela is a member of the Organization of the Petroleum Exporting Countries, which is implementing a supply cut deal to support prices.
Russia, OPEC`s biggest non-member ally, and China have both publicly denounced the sanctions.
Meanwhile, Libya`s biggest oilfield, El Sharara, will remain shut until departure of an armed group occupying the site, the head of National Oil Corp said.For graphic on Venezuela crude oil exports, click https://tmsnrt.rs/2Sfgis6
Despite some tightening, global oil supply remains high, largely because of a more than 2 million bpd increase in U.S. crude oil production last year to a record 11.9 million bpd.
"Market participants are also looking ahead to the petroleum inventories report from the U.S.," Abhishek Kumar, Senior Energy Analyst at Interfax Energy in London. The U.S. Energy Information Administration crude and gasoline inventory data will be released on Wednesday.
Some in the oil industry also worry that crude demand could stutter if the trade war between Washington and Beijing slows global economic growth.
In China, a top oil importer, signs of a slowdown have emerged. Activity in its vast manufacturing sector is expected to shrink for the second straight month in January, a Reuters poll showed.
(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)
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