Tags: venezuela | political | chaos | oil | market

Venezuela's Political Chaos Won't Jolt Oil Market

oil barrels with flag of venezuela
(Yuriy Kirsanov/Dreamstime)

Thursday, 24 January 2019 08:30 AM Current | Bio | Archive

Venezuela Has Now 2 Presidents

In Venezuela it would appear that there are now two Presidents of the country claiming power. On Wednesday, the 35-year-old Venezuelan opposition leader Juan Guaidó declared himself as interim President and who has already been recognized by President Trump in his new role.

Countries like the United States, Canada, Brazil, Colombia, Chile, Peru, Ecuador, Argentina, Paraguay as well as the Organization of American States (OAS) support interim President Juan Guaidó, while countries like Mexico, Bolivia and Cuba still support President Nicolás Maduro. The European Union has suggested another election to sort things out, the BBC reported.

There are some implications for the oil market perhaps, but only in the long term.

By the way, it could be helpful to recall that Venezuela has the world’s largest oil reserves, but today Venezuela produces barely 1 million barrels a day when at the end of the 1990s it produced more than 3 million barrels a day.

Investors could do well keeping in mind that the state of the Venezuelan oil industry suggests that it may be some considerable time before there could be any meaningful change in Venezuelan’s contribution to global oil supply. 

European Central Bank (ECB) Monetary Policy Decisions

The European Central Bank (ECB) will keep interest rates unchanged at least through the summer of 2019, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to levels that are below, but close to, 2 percent over the medium term.

The Governing Council intends to continue reinvesting, in full, the principal payments from maturing securities for an extended period of time past the date when it starts raising the key ECB interest rates.

Risks remain tilted to the downside.

Eurozone Edges Closer to Stagnation

The just released IHS Markit Flash Eurozone PMI survey indicates that the Eurozone economy slipped closer to stall speed in January.

Businesses reported the weakest rise in output for five-and-a-half years and the first fall in demand for over four years.

The data in the PMI survey indicate that GDP of the Eurozone is rising at just 0.1 percent in this quarter.

Both the manufacturing and service sectors are close to stagnation, highlighting the broad-based nature of the current slowdown. Ongoing auto sector weakness, Brexit worries, trade wars and the protests in France are again widely cited as factors dampening growth.

Companies are concerned about a wider economic slowdown gathering momentum, with rising political and economic uncertainty increasingly affecting risk appetite and demand.

Chris Williamson, Chief Business Economist at IHS Markit said: The survey’s output and price gauges have both now fallen into territory more associated with the ECB loosening rather than tightening policy, raising pressure on the central bank to acknowledge that downside risks to the outlook now predominate.

US Government Partially Shutdown Continuous

The U.S. government remains partially shut down while President Trump has delayed the State of the Union address.

The president tweeted: “As the Shutdown was going on, Nancy Pelosi asked me to give the State of the Union Address. I agreed. She then changed her mind because of the Shutdown, suggesting a later date. This is her prerogative - I will do the Address when the Shutdown is over. I am not looking for an....”

“....alternative venue for the SOTU Address because there is no venue that can compete with the history, tradition and importance of the House Chamber. I look forward to giving a “great” State of the Union Address in the near future!” he said.

This is not something that markets particularly care about.

The U.S. Senate will vote today on two competing bills that, if passed, could end the month-long partial government shutdown. There is practically no chance the bills could pass.

Initial Jobless Claims

The initial weekly jobless claims in the week ending January 19 was 199,000, a decrease of 13,000 from the previous week's revised level.

This is the lowest level for initial claims since November 15, 1969 when it was 197,000.

The previous week's level was revised down by 1,000 from 213,000 to 212,000. The 4-week moving average was 215,000, a decrease of 5,500 from the previous week's revised average. The previous week's average was revised down by 250 from 220,750 to 220,500.

For investors it’s important to take note that these are very good numbers that confirm the continuous good state of the U.S. economy.

Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.

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Investors could do well keeping in mind that the state of the Venezuelan oil industry suggests that it may be some considerable time before there could be any meaningful change in Venezuelan’s contribution to global oil supply. 
venezuela, political, chaos, oil, market
Thursday, 24 January 2019 08:30 AM
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