Oil Prices Skid as Global Surplus Tempers Venezuela Risk


   
Barani Krishnan
DTN Refined Fuels Market Reporter

   SECAUCUS, NJ (DTN) -- Crude futures settled down 2% Tuesday (1/6), reversing 
the prior day's rally, as concerns of oversupply returned to depress a market 
boosted by risks related to OPEC member Venezuela.

   The pivot came as traders braced for oil inventory data from the American 
Petroleum Institute (API), which was due to report after 4:30 PM ET balances on 
crude, gasoline and distillates for the week ended January 2.

   API said during the prior week ended December 26 that U.S. commercial crude 
oil stocks rose by 1.7 million bbl, adding to an earlier 2.4 million bbl 
increase. The back-to-back builds came after drawdowns seen earlier in December.

   The U.S. Energy Information Administration will release its own inventory 
report for last week at 10:30 a.m. on Wednesday (1/7), allowing the market to 
verify the API numbers.

   Oil prices jumped Monday (1/5) after the Saturday (1/3) capture by U.S. 
forces of Venezuelan president Nicolas Maduro and his wife. While Venezuela 
accounts for less than 1% of global supply at around 1.1 million bpd, analysts 
said recent developments in the country could further restrain its output.

   OPEC's decision at the weekend to stick to its November pledge of not 
raising production in the first quarter of this year had reinforced Monday's 
bullish sentiment.

   Concerns about a global glut have seized the oil market since last year 
after OPEC and its partners rolled back pandemic-era output cuts to add nearly 
3 million bpd in supply between mid and late 2025.

   The International Energy Agency has warned of a potential supply surplus of 
3.8 million bpd in 2026, pointing to weak global demand. And while OPEC has 
resolved not to add to production in the first three months of the year, 
analysts said U.S. production could continue expanding from last year's record 
highs of 13.9 million bpd.

   Traders also pointed to a slackening in U.S. industrial activity that 
influences the transportation fuels market.

   The U.S. December ISM Manufacturing reading of 47.9 issued Monday (1/5) 
showed factory output in decline for a tenth consecutive month, a development 
that directly threatens diesel demand as less trucking activity may be needed 
to carry goods.

   The NYMEX WTI futures crude contract for February delivery settled down 
$1.19, or 2%, at $57.13 bbl. ICE Brent for March delivery closed down $1.06, or 
1.7%, at $60.70 bbl.

   RBOB futures for February shipment slipped $0.0222 to $1.7243 gallon while 
the front-month ULSD for February retreated by $0.0619 to $2.0809.

   The U.S. Dollar Index was up 0.373 points to 98.355 against a currency 
basket.




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