Investing.com - The thought of losing Venezuelan crude seems to be a greater worry to U.S. oil traders than seeing anemic demand for gasoline.
New York-traded West Texas Intermediate crude settled up on Thursday while London's Brent oil barely dipped despite a surprising weekly jump in U.S. crude inventories and another gasoline build that reportedly took the motor fuel's stockpiles to record highs.
The market focused instead on speculation that the Trump administration was considering sanctions against Venezuelan oil to punish President Nicolas Maduro's government for rescinding diplomatic ties with Washington amid a leadership crisis in the South American country.
WTI settled up 51 cents, or 1%, at $53.13 per barrel, after losing a combined 3% in the past two days.
Brent, the global oil benchmark, was down a penny at $61.13 by 3:30 PM ET (20:30 GMT), after sliding some 2.5% over the past two sessions.
Even gasoline rose, climbing 0.2% to $1.388 per gallon, despite Reuters saying the motor fuel's stockpiles of 259.6 million barrels were a new all-time high.
Heating oil, a proxy for diesel, gained 0.1% to trade at $1.89 per gallon.
"I think oil prices are up as a whole because of the Venezuelan situation," said Phil Flynn, energy markets analyst at The Price Futures Group brokerage in Chicago.
"If we do lose Venezuelan oil and supply of diesel hits below the five-year average, that could be supportive for the entire oil complex," Flynn said. "It's on days like these when you wish you could be trading the different blends of crude easily, but the Venezuelan tide is, instead, raising all boats at once."
The U.S. has drafted a slate of potential restrictions on Venezuelan crude exports, but hasn’t decided whether to deploy them, Bloomberg reported, citing people familiar with the matter. It added that the crisis in Caracas could expedite OPEC’s goals of balancing the supply-demand in oil and boosting crude prices or risk market havoc.
John Kilduff, founding partner at New York energy hedge fund Again Capital, doubted the Trump administration would go ahead with sanctions on Venezuelan oil, typically a sour-grade oil suited for producing diesel, jet and other commercial fuels, compared to WTI's sweet grade meant for gasoline.
"If the sanctions are on, they would no doubt be a big blow to the commercial transportation sector, precisely the airlines, truckers and railroads, 100%," Kilduff said. "WTI is not exactly reflective of that. But at the end of the day, if it’s just crude headlines the market is looking at, then yes, there’s a reason to hold WTI up, although it’s a case of apples and oranges."
Tariq Zahir, founder of the energy-focused Tyche Capital Advisors fund in New York, agreed.
"If we put sanctions on Venezuela, that could be a bullish tilt for the oil complex," Zahir said. "But the builds in U.S. crude and gasoline are real and those should take center stage in the days and weeks to come."
The EIA said U.S. crude inventories rose by 7.97 million barrels in the week to Jan. 18, compared to forecasts for a stockpile draw of 0.042 million barrels. In the previous week, crude inventories declined by 2.683 million barrels.
Gasoline stockpiles rose by 4.05 million barrels, compared to expectations for a build of 2.66 million barrels. The previous week's build was 7.5 million barrels.
Inventories of distillates , which produce diesel and other commercial fuels. decreased by 0.62 million barrels, compared to forecasts for a decline of 0.23 million. Distillates rose by 2.97 million barrels the previous week.