Oil Ekes Out Gains As Analysts Shift Focus To Supply Concerns

The Venezuela blockades are a chief point of analytical debate - for now: File Image/Pixabay

At least one analyst on Thursday warned that crude may be underpriced, as a slow shift in concern overall from glut worries to market tightening resulted in minuscule gains for two key benchmarks.

Brent settled up 14 cents at $59.82 per barrel, while West Texas Intermediate settled up 21 cents at $56.15 per barrel.

Whether or not the shifting concerns were the beginning of a trend, they were caused mainly by Washington's blockade of Venezuelan oil tankers and sudden worries that the Russia/Ukraine peace talks may not bear fruit – even though U.S. president Donald Trump on Thursday said the talks are "getting close to something."

Dennis Kissler, senior vice-president of trading at BOK Financial, said, "Crude futures are trying to find support from the Venezuelan oil export blockade, which if it continues will likely cause production in the area to be shut in with no destinations to ship out to.

"If no Russia/Ukraine peace deal is reached, the attacks on Russia could escalate, quickly tightening supplies, and if you add in the blockade on Venezuelan oil, crude prices may very well be a bit underpriced here."

ING calculated that the Venezuela blockade could impact 600,000 barrels per day (bpd) of that country's exports, mainly intended for China.

Adding to supply concerns was Bank of America, whose analysts noted that low oil prices in and of themselves would reduce supply, with shale output contracting by 70,000 bpd if Brent averages $57 per barrel in the New Year.

In related oil news on Thursday, the latest data by the Joint Organizations Data Initiative (JODI) showed that global oil demand increased by 677,000 bpd in October from September, with India's demand alone accounting for 201,000 bpd during that time frame.

JODI also estimated that global crude inventories rose by 36.9 million barrels in October compared to September, while product inventories declined by 13.9 million barrels month-on-month.

Also on Thursday, Bloomberg's compilation of shipping data revealed that Russia's oil exports were facing delays as the tankers avoided the normal Black Sea route to the Turkish straits and took a 70 percent longer route, travelling along the Georgian and Turkish coasts in order to thwart drone attacks from Ukraine.