Oil price to stabilise after Venezuela probe
The benchmark West Texas oil futures(#WTI) briefly rallied to $64.77 yesterday on news of the local difficulties in Venezuela between the man currently in power, Nicolas Maduro, and the man who believes he has a legitimate case to replace him, Juan Guaido, whose claims are supported by the US. This does not have the feel of a full-blown coup but more of an exploratory probe to test the loyalties of the military support for Maduro., and is likely connected to the fact that Venezuela is known to possess the largest proven oil reserves in the world, gauged at approximately 297bn barrels. Indeed, one is forced to wonder how the South American country with assets of this magnitude has managed to get itself into such a state of economic collapse that there are reports of food shortages of such scale that peoples pets are being consumed. As things stand, a change in Government does not look imminent, although pressure on the current leaders will be maintained. The oil price rise that was the natural consequence of yesterdays unrest seems to have abated and #WTI is currently right on the $63.70 trendline. The situation will now be monitored closely and, in the absence of further unrest, we’d expect the price to drift off a little from here. However South American politics can pick up momentum quickly so a cautious approach to risk mitigation will be the key defence policy for oil bears.