Energy Voice | Oil holds advance on trade-talk optimism and Venezuelan crisis

Oil held its biggest gain in more than a week as investors assessed the impact of U.S. sanctions against Venezuela, while waiting for the outcome of trade talks between Washington and Beijing.

Futures in New York were steady after climbing 2.5 percent on Tuesday. Venezuela is considering declaring force majeure with the U.S. after the White House effectively banned American companies from purchasing its crude. The U.S. and China sit down in Washington on Wednesday for two days of high-level discussions after Treasury Secretary Steven Mnuchin told the Fox Business Network that he expected “significant progress” in the talks.

Oil is trading in its tightest range in four months as the Organization of Petroleum Exporting Countries and its allies trim output to fight a global glut driven by record U.S. production. The crisis in Venezuela has so far had only a limited impact on prices as it doesn’t change the overall supply and demand picture. Restoring the country’s output could take years, according to Jeff Currie, head of commodities research at Goldman Sachs Group Inc.

“There’s little room for oil to gain significantly unless the political situation in Venezuela blows up,” said Kim Kwangrae, a commodities analyst at Samsung Futures Inc. in Seoul. “Investors are also closely watching what happens with the trade talks in Washington.”

West Texas Intermediate crude for March delivery fell 6 cents to $53.25 a barrel on the New York Mercantile Exchange at 3:29 p.m. in Singapore. The contract climbed $1.32 to close at $53.31 a barrel on Tuesday, the biggest advance since Jan. 18.

Brent for March settlement was 3 cents lower at $61.29 a barrel on the London-based ICE Futures Europe exchange. The contract increased $1.39 to $61.32 in the previous session. The global benchmark crude was at a $8.03 premium to WTI.

Force Majeure

Investors are waiting to see how Venezuela responds to the latest American sanctions. If Caracas decides to declare force majeure on its crude exports to the U.S. market, almost 12 million barrels could be affected next month, according to a loading program seen by Bloomberg. Force majeure protects a party from liability if it can’t fulfill a contract for reasons beyond its control.

The U.S. and China are trying to resolve their trade differences before a March 1 deadline, when American tariffs on $200 billion of Chinese imports will increase to 25 percent from 10 percent. The talks come in the wake of lower-level discussions this month in Beijing, and after a period of market turmoil that has left both governments eager to publicly claim progress to calm investors’ nerves.

Other oil-market news: The American Petroleum Institute reported a 1-million-barrel increase in nationwide crude inventories, while a Bloomberg survey estimated a 3.15-million-barrel gain ahead of government data Wednesday. The U.S. is considering tapping the nation’s emergency reserves while a firm decision hasn’t been made yet, Reuters reported, citing a government official.  Exxon Mobil Corp. reached a final investment decision to expand a Texas oil refinery by more than 65 percent as surging shale oil production from the Permian Basin creates an abundance of light, low-sulfur crude. Libya’s state-run National Oil Corp. wants to have control over the security of its oil fields to ensure production remains stable, the company’s chairman Mustafa Sanalla said in London.

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