Oil edges down as USA supplies, economic worries eclipse Venezuela turmoil

Oil prices stabilise at $61.58/b over by OPEC production cut

Despite these efforts, oil remains in ample supply, not least because of soaring USA crude oil production, which jumped by more than 2 million bpd previous year to a record 11.9 million bpd.

The API reported late Wednesday afternoon that USA crude oil inventories rose by 6.6 million barrels for the week-ended January 18.

Analysts say sanctions, or a further drop in Venezuelan oil output, could leave American refiners on the hunt for heavy crude from elsewhere, providing a potential price lift for Canadian producers. -China trade dispute and broader gloom over world economic growth put a check on prices.

Prices on Tuesday came under pressure after a warning for 2019 global growth from the International Monetary Fund and weak economic data out of China, which underlined concerns about global economic growth and energy demand.

Brent crude oil futures ended the session at $61.64 a barrel, up 55 cents, or 0.9 per cent. Brent, however, has shed about 1.7 per cent since the start of trade on Monday and is on track to post its first week of losses in four weeks.

Venezuela's opposition leader Juan Guaido declared himself interim president on Wednesday, winning backing from Washington and parts of Latin America and prompting socialist Nicolas Maduro, the country's leader since 2013, to break relations with the United States.

More turbulence in Venezuela - including the threat of United States sanctions on its crude oil exports - has Canada's oilpatch watching carefully for how the impact will ripple across the industry. US West Texas Intermediate (WTI) crude futures were at $52.44 per barrel, 18 cents lower from their last close.

The European Union is expected to launch a mechanism that would facilitate nondollar trade with Iran, circumvent US sanctions, Reuters reported Wednesday , citing comments from diplomats. However, it has not yet taken that step, nor has it elected to cut off supply of USA oil that goes to Mexico.

"There's a lot of doubt in the market that Trump will pull the trigger on oil sanctions" aimed at Venezuela, said Joe McMonigle, a former Energy Department official under President George W. Bush.

A report from Rystad Energy says that U.S. oil production is likely to increase in the coming years.

"There's not enough pipes to ship all the oil that companies have been producing", said Jim Burkhard, vice president of oil markets research at IHS Markit. The primary importers of Venezuelan crude are Citgo, Valero Energy, and Chevron.

US refiners "will need to hustle to secure alternate foreign crude oil supplies to replace short-haul Venezuelan heavy sour with Mexico and the Middle East such as Iraq and Saudi Arabia being the most logical replacements", said John Driscoll, the chief strategist at JTD Energy Services Pte Ltd. Stockpiles are 6.6 percent higher than a year ago. The country sends 41 percent of its oil exports to the U.S. Critically, U.S. refiners are among the few customers that pay cash to Venezuela for its oil.

"It's certainly not a bad thing for Canadian heavy crude producers to have a competitor in a market like the U.S. Gulf Coast potentially go away", said John Auers, executive vice-president at energy consultant Turner Mason & Co.in Dallas.

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