Recap: The oil market traded sharply higher on Thursday after two days of declines as the market continued to assess the developments in Venezuela and was well supported by the news that progress was made on a proposed U.S. sanctions legislation against countries doing business with Russia. The market rebounded over last week’s closing levels, recovering from the Venezuela-related selling, on expectations that a meaningful amount of Venezuelan crude coming into the Gulf Coast region could be years away. U.S. oil companies are reportedly seeking guarantees from the U.S. before they decide to make large investments in Venezuela ahead of a meeting with the Trump administration scheduled for Friday. The market was also supported by the news that U.S. President Donald Trump is allowing a Russian sanctions bill to advance, raising concerns of further disruption to Russian oil exports. The market was further supported by news that a Russia-bound oil tanker suffered a drone attack in the Black Sea. The crude market posted a low of $55.97 in overnight trading before it retraced its previous losses. The market retraced more than 62% of its move from a high of $58.88 to a low of $55.76 as it rallied to a high of $57.84 ahead of the close. The February WTI contract settled up $1.77 at $57.76 and later continued to extend its gains in the post settlement period, posting a new high of $58.50. The March Brent contract settled up $2.03 at $61.99. The product markets ended the session higher, with the heating oil market settling up 6.28 cents at $2.1195 and the RB market settling up 6.58 cents at $1.7603.
Technical Analysis: The crude market will likely trade mostly sideways as the market awaits the outcome of the Trump administration’s meeting with oil majors on Friday to discuss ways of raising Venezuela’s oil production. The market will also look to the developments regarding a drone attack on a Russia bound tanker in the Black Sea as well as the bipartisan sanctions bill targeting countries doing business with Russia moving forward in Congress for a vote as early as next week. The market is seen finding resistance at $58.50, $58.88, $58.93, $60.01, $60.12, $60.45, $60.60, followed by $60.87 and $61.01. Meanwhile, support is seen at $55.97, $55.76, $55.61, $55.08 and $54.89.
Fundamental News: The Wall Street Journal reported that U.S. President Donald Trump and his advisers are planning an initiative to dominate the Venezuelan oil industry for years to come, and the president told aides he believes his efforts could help lower oil prices to $50/barrel. It reported that a plan under consideration includes the U.S. exerting some control over Venezuela’s state-run oil company PDVSA, including acquiring and marketing the majority of the company’s oil production.
In an interview published by the New York Times, U.S. President Donald Trump said that “only time will tell” how long the United States will maintain oversight of Venezuela. He said U.S. oversight of Venezuela could last for years. He made no commitments about when elections would be held in Venezuela. In the interview, President Trump also added that that the U.S. was “getting along very well” with the government of the interim president, Delcy Rodriguez, a longstanding Maduro loyalist who had served as the ousted leader’s vice president.
The Financial Times reported that U.S. oil companies want “serious guarantees” from Washington before they make large investments in Venezuela as President Donald Trump urges them to back his bid to reshape energy markets.
The U.S. Senate advanced a resolution on Thursday that would bar President Donald Trump from taking further military action against Venezuela without congressional authorization, paving the way for further consideration in the 100-member chamber.
Late Wednesday, U.S. Republican Senator Lindsey Graham said that President Trump had “greenlit” a bipartisan Russia sanctions bill after the pair met on Wednesday.
Ukrainian President, Volodymyr Zelenskiy, said the text of a bilateral security guarantee between Kyiv and Washington was “essentially ready” to be finalized with U.S. President Donald Trump.
Early Market Call – as of 8:55 AM EDT
WTI – Feb $58.24, down 16 cents
RBOB – Feb $1.7744, down 39 points
HO – Feb $2.1402, down 43 points
