Oil up in choppy trade

HOUSTON: Oil prices rose more than 1 percent on Monday as traders assessed the possible impact on crude flows from Venezuela, home to the world’s largest oil reserves, from the US capture of Nicolas Maduro.

Brent crude futures were up 87 cents, or 1.43 percent, at USD61.62 a barrel by 11:27 a.m. EDT (1627 GMT). US West Texas Intermediate crude gained 90 cents, or 1.57 percent, to USD58.22. Both benchmarks rose more than USD1 in late morning trade after falling more than USD1 earlier in a choppy session as investors digested news of Maduro’s capture and that Washington would take control of the OPEC member, crude exports of which had been under a US embargo that remains in place.

“The unknown for the oil market is how oil flows from Venezuela will change due to US actions,” Aegis Hedging analysts said in a note. In a global market with plentiful oil supply, some analysts said that any further disruption to Venezuela’s exports would have little immediate impact on prices.

Venezuelan oil output has plummeted in recent decades, curbed by mismanagement and a lack of foreign investment after the nationalisation of oil operations in the 2000s.

Output averaged about 1 million barrels per day last year, equating to about 1percent of global production. Venezuela’s acting president offered on Sunday to cooperate with the United States.

“I expect the naval attack and blockade to be lifted and, eventually, sanctions to be lifted, allowing much, if not all, of the Venezuelan oil stuck at sea and in bonded storage to become available to the market,” said Simon Wong, portfolio manager at Gabelli Funds, adding that it will take some time for Venezuela to increase production. Others were more hesitant.

“The oil market is faced with a surplus unrelated to Venezuela. We can see why the market may focus on the bearish angle of more barrels out of Venezuela; we just do not see that happening quickly,” said Bernstein analysts.

Trump also raised the possibility of further US interventions, suggesting Colombia and Mexico could face military action if they did not reduce the flow of illicit drugs. Analysts are also awaiting Iran’s reaction to Trump’s threat to intervene in a crackdown on protests in the OPEC producer.

“There’s clearly more geopolitical risk now,” Simon Lack, portfolio manager of the Catalyst Energy Infrastructure Fund, said in a note.