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Oil nearly flat in pause after previous session's gains

By
Renzo Pipoli
Crude oil prices were near flat early Thursday in what was seen as a pause following gains in the two previous sessions, as traders weighed ongoing geopolitical developments. Photo by Brian Kersey/UPI
Crude oil prices were near flat early Thursday in what was seen as a pause following gains in the two previous sessions, as traders weighed ongoing geopolitical developments. Photo by Brian Kersey/UPI | License Photo

Jan. 31 (UPI) -- Crude oil prices were nearly flat Thursday morning in what was seen as a pause after gains in the two previous sessions, while traders weighed the impact of possible geopolitical-related supply and demand issues.

"Crude is pausing for breath after yesterday's solid rally," Matthew Smith, director of commodity research at ClipperData, told UPI.

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West Texas Intermediate crude future prices fell 0.1 percent to $54.18 per barrel as of 8:00 a.m. EST, while Brent crude futures rose about 0.2 to $61.63 per barrel.

The WTI price has gained from $51.99 per barrel on Monday and is up from $45.41 per barrel at the start of the month. Brent is up from $59.81 per barrel on Monday and $53.80 per barrel at the start of the year.

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"Trade war progress -- or lack thereof -- is once again being pitched versus supply concerns to keep prices showing a lack of conviction," Smith added.

The United States and China, the world's two biggest economies, have been making efforts to try to reach trade accords before March, when new tariffs are to go into effect unless an agreement is reached.

The United States, which is demanding concessions from China such as the elimination of trade practices it considers unfair, last year imposed tariffs against China to use as leverage. China reacted with countertariffs, leading to more tariffs from the United States.

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China is the world's leading crude oil importer and any economic slowdown there resulting from the ongoing trade dispute with the United States would lead to lower crude demand and weaker prices.

On the other hand, there are also supply concerns that have been pushing crude oil prices higher in recent sessions.

"While Venezuela remains front and center, Libyan exports have shown a solid drop this month, while Saudi Arabian deliveries to the U.S. have slammed on the brakes," Smith said.

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The supply from Venezuela, which produced in December 1.15 million barrels of crude oil per day, is likely to see disruptions after the United States imposed sanctions against state oil company PDVSA.

The sanctions prevent any payment by U.S.-based companies, including the Venezuelan fuel refining and retailing subsidiary Citgo, to go to accounts within Maduro's reach. Instead, the funds can only be available to the leader of the Venezuelan National Assembly, which was appointed by the institution to be the interim president until new elections are held.

Maduro has reacted by seizing the accounts of the National Assembly leader Juan Guaidó, and there is great uncertainty as to what will happen next in Venezuela -- where oil production has steeply and steadily declined in the past years.

Libya saw a 172,000-barrel-per-day month-over-month December output reduction, according to OPEC. This was the impact of oil fields shut down after they were occupied by a militia, as country officials reported.

As for Saudi Arabia, it is reducing output on purpose in a bid to help a recovery in oil prices, which are down from a peak in October 3 when Brent traded over $86 per barrel and WTI at over $76 per barrel.

OPEC countries agreed in Vienna in December to reduce production by 800,000 barrels per day starting in January, with Saudi Arabia leading the initiative. Saudi Arabia, OPEC's biggest producer, cut its December output by 468,000 barrels per day to 10.6 million barrels per day.

Some non-OPEC countries led by Russia agreed to match the cuts with a 400,000 barrel per day total reduction of their own.

The total 1.2 million barrel per day cut was to take effect January 1.

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