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Crude oil futures up on rising geopolitical tensions despite stock build

Singapore — Crude oil futures were higher during mid-morning trade in Asia Friday despite a larger-than-expected build reported in US crude inventory, as markets continued to focus on ongoing geopolitical tensions between the US and Venezuela.

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At 10:20 am Singapore time (0220 GMT), ICE March Brent crude futures were up 70 cents/b (0.98%) from Thursday's settle to $61.79/b, while the NYMEX March light sweet crude contract was up 60 cents/b (1.13%) at $53.73/b.

The US designation of Juan Guaido as Venezuela's legitimate president has created confusion among refiners, producers, services companies and traders now unsure of the legality of future commercial transactions with state-owned PDVSA, sources told S&P Global Platts on Thursday.

The US on Wednesday declared the presidency of Nicolas Maduro illegitimate, and recognized Guaido, the head of Venezuela's National Assembly, as the country's legitimate president. Other countries, including Canada, followed the US with similar declarations. "Literally every company is asking the same question: What does this mean?" one US refining industry lobbyist said Thursday. "Is Maduro PDVSA? No one knows. There's just no specificity."

"Crude oil prices inched higher as geopolitical risks outweighed an expected rise in inventories in the US, " ANZ analysts said in a note Friday.

"The White House administration is said to be considering new sanctions against the country, a risk to global oil supplies we foreshadowed last week," they added.

The "natural resources of Venezuela belong to the people of Venezuela not the dictator Maduro," Senator Marco Rubio, Republican-Florida, tweeted Thursday. "Valero & Chevron should work with President Guaido to make sure payment for oil [reaches] people not Maduro regime."

Maduro's illegitimate status in the US could be particularly problematic for the roughly 500,000 b/d of crude imported by US refineries owned by Chevron, Valero, PBF Energy and Citgo, which is owned by PDVSA. It is also unclear how Chevron's oil production operations in Venezuela may be impacted, sources said.

"The US has threatened to impose sanctions on Venezuelan oil exports if Maduro responds to the demonstrations with force. Oil prices are likely to profit from this in the short term given that the US recently imported approximately 350,000 barrels of crude oil from Venezuela," Commerzbank analysts said in a note.

"In 2018, Venezuela exported about 500,000 barrels of heavy crude a day to the United States but that has now fallen to about 350,000 barrels a day. This is raising concerns that we could see some cut in US runs because those barrels won't be easily replaced and could cause future diesel shortages," The Price Futures Group analyst Phil Flynn said in a note. Price increases were, however, capped by bearish data on US crude inventory released by the US Energy Information Administration on Thursday, which showed that US crude stocks had increased by 7.97 million barrels to 445.025 million barrels for the week ended January 18.

Analysts surveyed Tuesday by Platts were looking for US crude stocks to have dipped by 600,000 barrels for the same period.

The EIA also reported that US distillate inventories dropped by 617,000 barrels while US gasoline inventories rose by 4.05 million barrels last week. As of 0220 GMT, the US Dollar Index was down 0.03% at 96.195. --Avantika Ramesh, avantika.ramesh@spglobal.com

--Edited by Geetha Narayanasamy, geetha.narayanasamy@spglobal.com