Oil prices edged higher on Friday as political turmoil in Venezuela threatened to tighten crude supply, but concerns over surging US fuel stocks and global economic woes weighed on sentiment.
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.
U.S. West Texas Intermediate (WTI) crude futures were at $52.40 per barrel, 22 cents lower from their last settlement.
Oil prices have gone upwards on Friday following expectations that Venezuelan crude exports could soon be disrupted with rising turmoil in the region.
In the USA market, gasoline margins sank to $5.70 per barrel on Thursday, the lowest seasonally since 2009, weighed down by weak demand for the fuel and excess supply.
The Latin American nation could see crude production drop by one-third this year, analysts at Fitch Solutions said on Friday.
Analysts said high US crude oil production, which hit a record 11.9 million barrels per day (bpd) late previous year, was weighing on oil markets.
Venezuelan output has been hampered by chronic under investment by the nationalized oil company Petroleos de Venezuela SA (PdVSA).
How would an oil embargo affect Venezuela?More news: India puts into orbit satellite ‘Microsat R’ for DRDO and ‘Kalamsat’
However, the wealth and luck that should have been brought by Venezuela's huge oil reserves, has been affected by political unrest in recent years.
A U.S. Energy Department report that showed the biggest increase in domestic crude stockpiles since November and record gasoline inventories was largely shrugged off by investors.
In Caracas, President Nicolas Maduro and Juan Guaido, the opposition leader, gave dueling speeches while the United Nations Security Council prepared to meet tomorrow on the crisis.
Trump may have more power to impose sanctions on Venezuelan oil because prices are lower, according to Croft.
It has also held off on blocking exports of US -origin diluents, which Venezuela needs to dilute its heavy oil.
The biggest US refiners are expected to report strong fourth-quarter earnings thanks to profits from diesel processing in a strong USA economy, as well as a drop of about 40 percent in crude prices. Production of heavy crude in Mexico has been declining, and although there is a strong supply in Canada, there are challenges to getting that crude to the Gulf Coast refineries. If the U.S. stops importing oil from Venezuela, it would devastate the nation that is already economically disadvantaged, according to Risa Grais-Targow, director for Latin America at risk consultancy Eurasia Group.
"The main risk for the oil market is the situation in the Middle East because this is the big area of production, not only in Saudi Arabia but in the UAE and Kuwait".
Other industries that rely heavily on oil may feel impacts.