Venezuela CRISIS: Oil ‘TICKING TIME BOMB’ set to detonate with rapid ‘PRICE REACTION’

Monday, January 28, 2019
By Paul Martin

VENEZUELA could spark an oil “price reaction” as political turmoil continues to grip the crisis-hit South American nation, according to an analyst.

Mon, Jan 28, 2019

The cash-strapped nation is currently in the midst of a political meltdown with President Nicolas Maduro confronting an unprecedented challenge to his authority after opposition leader Juan Guaido declared himself interim president. Citing a fraudulent election and winning wide international support, Guaido has sparked a united front from Britain, Germany, France and Spain, who have all called for fresh elections in Venezuela. The latest crisis comes following four years of economic hardship which has left Venezuelans in their fifth year of a recession. The financial crisis has halved the size of the economy and forced three million people to emigrate to escape hyperinflation and rampant crime.

Stephen Brennock, oil analyst at PVM Oil Associates, predicts the latest upheaval could lead to a turbulence in oil prices which will be “anything but muted”.

He was quoted by CNBC as saying: ”(Venezuela) provided little in the way of bullish impetus with markets having become accustomed to its long-running woes.

“Even so, recent events have provided a timely reminder of its wildcard status for the energy complex.

“Oil’s ticking time bomb is sure to detonate at some point and the price reaction will be anything but muted.”

As of just after 4:30pm UK time, WTI crude oil is down 3.67 percent to $51.72 per barrel.

Brent crude has fallen 2.81 percent to $59.86 per barrel.

The United States last week hinted it may impose sanctions on Venezuelan exports after recognising Guaido as interim president this week, prompting President Maduro to cut ties with Washington.

RBC Europe predicted that US sanctions could nearly double projected output shortfalls from Venezuela.

It said: “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.”

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