An oil tanker in the sea outside the Puerto La Cruz oil refinery in Puerto La Cruz, Venezuela. Picture: REUTERS/ALEXANDRA ULMER
An oil tanker in the sea outside the Puerto La Cruz oil refinery in Puerto La Cruz, Venezuela. Picture: REUTERS/ALEXANDRA ULMER

London — Oil prices rose on Tuesday after Washington imposed sanctions on Venezuelan state-owned oil firm PDVSA in a move that may curb the Opec member’s crude exports, but price rises were capped by ample global supply and signs of a slowing Asian economy.

International Brent crude oil futures were up 61c at $60.54 a barrel by 9.41am GMT.

US West Texas Intermediate (WTI) crude futures were up 48c at $52.47 a barrel.

Venezuela has the world’s biggest proven oil reserves, but its potential has not been realised due to a lack of investment. The country is also a member of producer cartel Opec, which is implementing a supply cut deal.

“The Latin American country is predominantly the producer of heavier crude, exactly what [US Gulf] refiners are thirsty for,” PVM said in a note.

“They will now have to turn elsewhere [possibly to Mexico, Saudi Arabia and Iraq] to satisfy their needs for this type of crude, which would inevitably lead to a price spike.”

Venezuela’s exports fell to little more than 1-million barrels a day in 2018 from 1.6-million barrels a day in 2017, according to Refinitiv ship tracking data and trade sources.

The US has been the biggest buyer of Venezuelan oil despite their political differences, taking about half of the country’s export volumes, followed by India and China.

While news of the sanctions against Venezuela grabbed headlines, analysts said the fundamental issue for global oil trade remained plentiful supply.

Global oil supply remains high largely due to a more than 2-million barrels a day increase in US crude oil production last year, to a record 11.9-million barrels a day.

“[The] focus will be intensifying on the US inventory data tomorrow, with expectations of a further build in stocks — a larger build will likely see crude taking a further step downwards,” Cantor Fitzgerald Europe said in a note.

There are also concerns in the oil industry that crude demand could stutter amid an economic slowdown.

Activity in China’s vast manufacturing sector likely shrank for the second consecutive month in January, a Reuters poll showed, heightening concerns over the risks the Chinese slowdown poses to the global economy.

Warnings from Caterpillar and Nvidia on Monday about weakening demand from China have concerned investors, who could see more profit shortfalls from US companies that count on the world’s number two economy for a big portion of their business.