Oil prices came under pressure in the middle of the week. This was triggered by a statement by US President Trump on his social media platform that the US would buy 30-50 million barrels of sanctioned Oil from Venezuela. The plan is to purchase Venezuelan Oil, which is stored in tankers and could not be exported due to the US blockade in place since mid-December, at market prices and deliver it to US ports, Commerzbank's commodity analyst Carsten Fritsch notes.

Oil prices fall after US president’s statement

"It could then be processed by refineries on the US Gulf Coast. So far, only one US Oil company has a license to export limited quantities of Oil from Venezuela. Today, there will be a meeting at the White House attended by two major Oil traders and nearly 20 executives from the US Oil industry. The meeting is expected to focus on the utilization of Venezuela's Oil reserves. The US blockade of sanctioned shadow fleet ships had led to Chinese buyers recently purchasing significantly less Venezuelan Oil. They had previously been the main buyers."

"The US Oil market would be oversupplied as a result of Oil deliveries from Venezuela, allowing the US to export more of its own Oil. This would bring more light Oil from the US onto the market, which may explain the decline in WTI prices. China would be the big loser in a deal between Trump and Venezuela. Chinese buyers, mostly independent refineries, would have to look for other lower-priced suppliers."

"These are likely to be Iran and Russia, which also have to offer their Oil at a discount due to sanctions. As a result, new conflicts with the US could arise, as demonstrated by the seizure of two sanctioned Oil tankers by the US this week. However, Canadian Oil, which is similar to Venezuelan Oil, is also likely to be of interest to Chinese buyers. The impact on the global Oil market would be minimal, as it would only lead to a shift in transport routes, which would not affect the Oil supply."