NEW YORK: Oil prices edged higher on Friday as political turmoil in Venezuela threatened to tighten crude supply, but concerns over surging US fuel stocks and global economic woes weighed on sentiment.
The United States signalled on Thursday it may impose sanctions on Venezuelan exports after recognising opposition leader Juan Guaido as interim president this week, prompting President Nicholas Maduro to cut ties with Washington.
But the ongoing US-China trade dispute and broader gloom over world economic growth put a check on prices.
Brent crude oil futures were at $61.70 a barrel at 1:43 p.m. EST (1843 GMT), up 61 cents, or 1 percent. Brent, however, has shed about 1.5 percent since the start of trade on Monday and is on track to post its first week of losses in four weeks.
US West Texas Intermediate (WTI) crude futures were trading at $53.77 per barrel, up 64 cents, or 1.2 percent. WTI futures are roughly flat on the week.
RBC Europe predicted that US sanctions could nearly double projected output shortfalls from Venezuela.
"Venezuelan production will decline by an additional 300,000-500,000 barrels per day (bpd) this year, but such punitive measures could expand that outage by several hundred thousand barrels," it said.
Still, some analysts said the possibility of immediate sanctions were unlikely.
"We view a blockade on Venezuelan imports as low probability and a last resort measure that is likely weeks if not months away should it materialize," Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.
"The evolving situation in Venezuela appears capable of delaying our expected test of $50 support."
Global oil markets are still well supplied, however, thanks in part to a spike in US output.
Record US production would likely offset any short-term disruptions to Venezuelan supply due to possible US sanctions, Britain's Barclays said in a note. The bank cut its 2019 average Brent forecast to $70 a barrel, from $72 previously.
US energy firms this week increased the number of oil rigs operating for the first time this year. Drillers added 10 oil rigs in the week to Jan. 25, bringing the total count to 862, General Electric Co's Baker Hughes energy services firm said in its closely followed report on Friday.
The output surge has swollen US fuel stocks, and crude inventories rose by 8 million barrels last week, according to official data released on Thursday.
Refining profits for gasoline are crashing around the world as consumption stalls amid a huge wave of new supplies, resulting in record inventories in Asia, America and Europe.
In the US market, gasoline margins <RBc1-CLc1> sank to $5.70 per barrel on Thursday, the lowest seasonally since 2009, weighed down by weak demand for the fuel and excess supply.
Analysts have predicted a more balanced market due to a production cut pact by the Organization of Petroleum Exporting Countries (OPEC) and its allies including Russia, as well as potential export disruptions in Venezuela, Iran and Libya.
"While the current state of affairs is price constructive for oil, the market is hesitant when it comes to the global outlook," Harry Tchilinguirian, global head of commodity markets strategy at BNP Paribas, told the Reuters Global Oil Forum.
Demand may start to stutter because of a global economic slowdown, which is likely to dent fuel consumption.
A trade dispute between the United States and China and tightening financial conditions around the world have hurt manufacturing activity in most economies, including in China, where growth last year was the weakest in nearly 30 years.
According to Reuters polls of hundreds of economists worldwide, a synchronised global economic slowdown is underway and would deepen if the US-China trade war escalated.