Major Build In Crude Inventories Sends Prices Tumbling

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Political risks have been sharply in focus for oil markets although much-discussed US sanctions on Iran, imposed last November, failed to have that much of an effect on global supply as a handful of waivers were granted to oil importing countries, like Japan and India, allowing them to continue to buy oil from Iran.

However, fresh data on surging US fuel stocks and worries about U.S. As a result, socialist leader Nicolas Maduro, who has been in power in Venezuela since 2013, broke relations with the US and gave American diplomats 72 hours to leave the country.

The administration added to pressure on Maduro's regime on Wednesday by recognizing opposition leader Juan Guaido as the country's interim president.

The oil executive also underscored "difficult access to water, and electricity" in Venezuela.

Venezuela, on average, exported about 500,000 barrels of crude a day to the United States in 2018, according to U.S. Energy Department data. It was the sharpest year-on-year decline since October 2016.

Venezuelan oil only accounts for 6% of United States oil imports, but an oil embargo could cause the U.S. to strain its domestic supply.

"Sanctions would cut off the lifeblood of Venezuela's economy", said Smith.

The United States is Venezuela's biggest and most important oil customer, accounting for 39% of the OPEC nation's deliveries previous year, according to ClipperData.

Washington signalled it could impose sanctions on Venezuela's crude exports as Caracas descends further into political and economic turmoil.

Venezuelan output has been hampered by chronic under investment by the nationalized oil company Petroleos de Venezuela SA (PdVSA).

The output surge has swollen USA fuel stocks, and crude inventories rose by 8 million barrels last week, according to official data released on Thursday.

Oil steadied near $53 a barrel as traders assessed whether an escalating crisis in Venezuela will reduce already-depleted exports from the OPEC member.

The American Petroleum Institute said on Wednesday U.S. crude inventories rose by 6.6 million barrels in the latest week, versus expectations for a fall of 42,000 barrels. "The market could be tighter than what people previously anticipated". "If it happens, it would be an unambiguous headwind for refiners already struggling to find supplies", said Bob McNally, president of Rapidan Energy Group, an energy consultancy in Bethesda, Maryland.

Of apparent less concern to traders was news from Baker Hughes that US drillers added 10 oil rigs in the week to January 25, bringing the total count to 862 - the first increase in the number of operating rigs this year - however, like the Venezuela issue, this news may have a delayed reaction that could play out in coming days.

The United Nations Security Council, meanwhile, scheduled a meeting in NY on the turmoil, as the US ordered many of its diplomatic personnel out of the country and considered sanctions on its oil exports.