When we think of oil, we don’t tend to quickly turn our thoughts to Venezuela, however, this South American nation’s oil output rivals that of Mexico, Nigeria, and Kuwait. Refineries and importers of oil in the US could see a big hit in their profitability and stability of supply, should sanctions take effect.
Concerns over the political stability of the country, with many foreign leaders weighing in on the subject, have left markets worrying about the price of oil, which has already started to creep up. Supply problems from this OPEC nation would help the cartel achieve its goals of reducing output and raising prices, but political instability is also on the minds of OPEC leaders as they try to calm the markets.
Other factors, too, are pushing oil prices up this week as the trade outlook continues to look bleak with concerns of a global economic slowdown. Politically, the US is poised to impose sanctions on Venezuela which would hit oil markets hardest. A spike in US output has, so far, kept markets in check, however, the question remains if this will continue should demand start to fall.
The government shutdown in the US is also affecting overall demand, domestically, for oil products with money being held from the economy through the salaries of government workers and other private sector businesses affected by the government shutdown.
If that wasn’t enough, China-US relations are still teetering between escalation into a trade-war and de-escalation into a fragile status-quo. Analysts foresee this being a very significant factor for the medium term as far as oil prices are concerned.