Oil Holds Biggest Gain in More Than a Week
(Bloomberg) -- 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.
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.
--With assistance from James Thornhill.To contact the reporter on this story: Sharon Cho in Singapore at firstname.lastname@example.org To contact the editors responsible for this story: Pratish Narayanan at email@example.com Ovais Subhani, Andrew Janes
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