Oil Breaks Out With Sudden Upswing As Washington Arranges Global Shifts In Crude Flows

Still, some analysts continue downplaying Venezuela's impact on oil trading: File Image/Pixabay

Oil traders on Thursday shifted gears from their default position of worrying about global oversupply to considering possible near-term supply shortages, spurred by events in Iran and other regions.

They also reportedly maintained relative indifference to Venezuela following Washington’s extraction of president Nicolas Maduro from that South American country.

Brent settled up $2.03, or 3.4 percent, at $61.99 per barrel, while West Texas Intermediate settled up $1.77, or 3.2 percent, at $57.76.

Ritterbusch and Associates analysts stated in a note, "The complex is rebounding, with the crude benchmarks back to about levels of last Friday's close prior to the U.S. removal of Maduro.

"The fact that this major development is having little impact on the energy complex is not surprising since the arrival of a meaningful amount of Venezuelan crude into the (U.S.) Gulf Coast region could be years away.”

Still, Maduro’s ouster to advance the U.S.’s purported goal of ridding the Western Hemisphere of Russian, Chinese and Iranian influence could reshape the global market; and foreign embassies in Venezuela were already arranging visits next week for representatives of U.S. and European oil companies.

Talks between Washington, Vitol and Trafigura regarding marketing Venezuelan oil will take place on Friday, according to sources; and state-owned Petroleos de Venezuela SA said it’s in negotiations with Washington over selling crude through a framework similar to an arrangement with Chevron Corp.

Amrita Sen, co-founder and director of research at Energy Aspects, told media, “You’re going to see more oil go to the U.S. at the expense of China, but not necessarily significant increases in Venezuelan production.”

As for Iran, Pavel Molchanov, investment strategy analyst at Raymond James, said widespread protests in that country, which seem to be growing instead of being quashed, could put oil exports at risk, “depending on how the situation evolves.”

For its part, Bloomberg on Thursday observed that, “Adding to the bullish momentum, an annual period of commodity index rebalancing is expected to see cash flow back into crude over the next few days...call skews for Brent have also strengthened as traders pile into options market to hedge."