Crude Prices Soar As Analysts Shift Gears And Now Worry About A Supply Shortage

Meanwhile, the Saudis now think the coronavirus is akin to a burning house: File Image/PixaBay

The perpetual pendulum of crude traders worrying about the world swimming in oil on one end and worrying about supply shortages at the other swung decisively to the latter on Wednesday, with oil prices hitting a three week high due to the U.S. in the earlier session sanctioning a unit of Russia's Rosneft.

Rosneft is Venezuela's main oil shipper, and analysts believe the sanction will seriously jeopardize the Bolivian republic's ability to export crude.

Reuters noted that the sanction will make it more difficult for Venezuela to export oil, particularly to countries such as China and India, however it will pose only a limited risk to Rosneft's broader business.

The new-found concern over Venezuela (whose output has already been marginalized by the U.S.) combined with more fighting in Libya that quashes hopes of ending a blockade of that country's crude exports, caused Brent on Wednesday to settle up $1.37 to $59.12 per barrel; West Texas Intermediate ended the session at $53.29.

So concerned was the analytical community about a shortage of oil on the world market that it shrugged off what would have normally caused substantial losses for the commodity: a report from the American Petroleum Institute that inventories rose 4.16 million barrels, according to people familiar with the data.

Venezuela and Libya's struggles also effectively cooled the furor over China's coronavirus, which has influenced trading for the past few weeks; however, in his first public comments on the virus since January when he stated the outbreak would have very limited impact on oil demand, prince Abdulaziz bin Salman, energy minister for Saudi Arabia, on Wednesday equated the outbreak with a burning house.

The prince was on record as saying, "Some would say that calling the fire brigade projects panic and it could damage the furniture," but doing so would simply be acting responsibly, and the house would be saved.