Published: Mon, January 28, 2019
Money | By Ethel Goodwin

Barclays cuts 2019 Brent oil price forecasts

Barclays cuts 2019 Brent oil price forecasts

Oil prices fell 1 percent on Wednesday, weighed down by swelling US inventories and a plunge in global stock markets amid concerns over an economic slowdown.

Venezuela, on average, exported about 500,000 barrels of crude a day to the United States in 2018, according to U.S. Energy Department data.

However, the market gains were capped as the U.S. Energy Information Administration (EIA) reported Thursday that the nation's crude oil inventories jumped 8 million barrels in the week ending January 18.

Barclays on Thursday cut its 2019 Brent price forecasts, saying large US production may offset any short-term disruptions to Venezuelan supply due to possible USA sanctions.

"The chances for another down-day are not bad at all if you believe the confirmation of last night's (U.S. inventory) stats by the EIA this afternoon will actually put further downward pressure on prices". Every $1-per-barrel increase in costs would slice 8 percent off of PBF Energy Inc.'s earnings and 1 percent from Valero Energy Inc.'s, they wrote in a note to clients on Friday.

Separately, the EIA's annual energy outlook report released Thursday said US crude oil production is expected to continue to set annual records through the mid-2020s and will remain greater than 14.0 million barrels per day through 2040.

How would an oil embargo affect the US?

But the two countries have long history of interdependency when it comes to oil that has endured through years of political tensions.

“As we shuffle into seasonal maintenance, it is no surprise to see refinery runs dropping, but this drop has been compounded by a big jump in imports to propel crude stocks higher, ” he said.

RBC Europe predicted that USA sanctions could almost double projected output shortfalls from Venezuela.

Analysts estimate it costs about US$20 per barrel to ship Canadian oil by rail to markets on the U.S. Gulf Coast, so discounts that are lower than that make the option less attractive.

Oil steadied near $53 a barrel as traders assessed whether an escalating crisis in Venezuela will reduce already-depleted exports from the OPEC member. "This would deal a further blow to USA refiners that rely on whatever Venezuelan oil is still available and as such would be short-term bullish".

The problem is that even though U.S. oil production has skyrocketed to record highs, America is not self-sufficient. If the USA stops importing oil from Venezuela, it would devastate the nation that is already economically disadvantaged, according to Risa Grais-Targow, director for Latin America at risk consultancy Eurasia Group.

Oil markets have been underpinned this year by production cuts led by the Organization of the Petroleum Exporting Countries, OPEC, aimed at reining in emerging supply overhang.

Other industries that rely heavily on oil may feel impacts.

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