Recap: The oil market erased its early gains and ended the session lower as the market weighed the uncertainty regarding Venezuela’s oil output after the U.S. capture of Venezuela’s President Nicolas Maduro and the concerns about an oversupply. The crude market traded mostly sideways before it breached its previous high and rallied to a high of $58.87 early in the morning. However, the market held resistance at that level and erased its earlier gains, posting a low of $57.03 ahead of the close. The February WTI contract settled down $1.19 at $57.13 and continued to sell off, trading to a low of $56.84 in the post settlement period in light of the news that the U.S. and Venezuela are in talks to export Venezuelan oil to the United States. The March Brent contract settled down $1.06 at $60.70. The product markets ended the session lower, with the heating oil market settling down 5.98 cents at $2.0830 and the RB market settling down 1.94 cents at $1.7006.
Technical Analysis: The crude market will continue to trade within its recent trading range as its upside remains limited by concerns over the supply outlook. The market will also likely remain under pressure by the weekly petroleum stocks reports, which are expected to show builds across the board. The market’s concern over supply could be exacerbated by the capture of Venezuela’s President Nicolas Maduro and its potential to hasten an end to the U.S. embargo on Venezuelan oil. The market will look to the developments on talks between the U.S. and Venezuela regarding the export of Venezuelan crude to the U.S. In regards to Venezuela increasing its output, political stability will be a key factor in U.S. oil companies returning to the country and it is expected to take years to see a significant increase in the country’s oil output. The oil market is seen finding support at $56.84, $56.31, $55.61, $55.08 and $54.89. Meanwhile, resistance is seen at $58.87, $58.93 followed by $60.01 and $60.12.
Fundamental News: Late Tuesday, U.S. President Donald Trump announced that Venezuela will be “turning over” 30-50 million barrels of sanctioned oil to the United States.
Earlier, the Trump administration dismissed analysts’ estimates that it would take years to increase Venezuela’s oil production, saying there were ways to quickly increase the country’s output. U.S. Interior Secretary, Dough Burgum, said one option was for the U.S. to lift sanctions on Venezuela that had prevented the country from accessing crucial oil field equipment and other technologies to maximize production. U.S. President Trump has stated that the U.S. industry could expand operations in Venezuela in less than 18 months, possibly with the help of subsidies.
Venezuela’s main opposition leader Maria Corina Machado has vowed to return home quickly, praising U.S. President Donald Trump for toppling Nicolas Maduro and declaring her movement ready to win a free election. U.S. President Trump has stated the United States needs to help address Venezuela’s problems before any new elections, calling a 30-day timeline for a vote unrealistic. President Trump has given little indication of backing the opposition leader. The U.S. administration appears so far to be hoping to work with interim President Delcy Rodriguez, a Maduro ally who has denounced his “kidnapping” while also calling for cooperation and respectful relations with Washington.
Shipping data showed that Venezuela’s main oil ports on Tuesday entered their fifth day without delivering crude for state-run PDVSA’s customers in Asia, as the U.S. pressures the nation through an oil embargo. On Monday, Chevron resumed exports of Venezuelan oil to the U.S. after a four-day pause and called workers abroad back to its Venezuela offices as flights to the country restarted. The U.S. firm has emerged in recent weeks as the only company fluidly exporting Venezuela’s crude.
The administration of President Donald Trump is planning to meet with executives from U.S. oil companies later this week to discuss increasing Venezuelan oil production after U.S. forces ousted its leader Nicolas Maduro.
Early Market Call – as of 8:40 AM EDT
WTI – Feb $56.89, down 8 cents
RBOB – Feb $1.7189, up 2.01 cents
HO – Feb $2.0926, up 1.36 cents
