Sanctions on Venezuela to boost oil
Published on 24.01.2019 19:15

The oil price is higher in today’s trading session as expectations grow that the possible sanctions to be levied against Venezuela will create a big gap in the Market

Venezuela's opposition leader Juan Guaido declared himself interim president today which drawn fierce criticism from Allies such as Russia and Turkey but won support from countries such as the US, Canada and many South American countries.

The current president, Nicolas Maduro, swiftly cut diplomatic relations after the US backed the interim president and ordered all US embassy staff out of the country within 72 hours.

There is now speculation that the first step to get rid of Maduro is that US President Donald Trump will introduce sanctions against Venezuela in a bid to strangle the economy and force Maduro to resign

"That's the big story of the day for oil," said Phil Flynn, an analyst at Price Futures Group in Chicago. "The market is really concerned about the geopolitical factors and what will happen if there are sanctions on Venezuela."

There is doubt that Trump will follow through on his promise to introduce sanctions but some say the wheels may be already in motion and the market has not taken this into account and when it becomes clear, the oil price will see a big spike

"The potential is that the U.S. is starting to put things in motion and the risk for an acceleration in the decline in production from Venezuela is increasing," noted Petromatrix strategist Olivier Jakob

"For now, it's not being fully priced in, but I think this does provide a new upside risk for the market." He added.


Andrew Masters

Analyst

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