Influence of situation in Venezuela

Influence of situation in Venezuela on the European market

Crisis in Venezuela doesn’t have a significant influence on market yet. But it can impact on it in the future.

Situation in Venezuela and the price of oil

Some people thought that crisis in this country could lead to appeciation of oil. But it didn’t happen. Furthermore, in January there was a decrease in prices. We could see such numbers:

  • futures on Brent oil costed 60,54 $ for a barrel;
  • futures on WTI oil — 52,7 $ for a barrel.

The prices decline locally, and it is connected with the increase of number of drilling rigs in the USA.

Influence of situation in Venezuela

Why doesn’t the situation in Venezuela influence the prices of oil?

One of the experts of Alpari said, that the share of Venezuela on the world oil market is very small. The absence of these deliveries are almost inconspicuous. This can be explaned with the fact, that such quontities of commodity can be easily replased by supplies from the United States and Canada.

How can it influence the market in future?

The situation in Venezuela can lead to such consequences:

  1. Some experts think, that this country can dump the oil, and crash the world market this way. But it is not very beneficial for Venezuela itself. But after all, some European states purchase this country’s commodity with pleasure.
  2. Some specialists claim, that the prices of oil can increase rapidly, if the military activity will start on the territory of Venezuela.

But in the nearest future significant changes on the European market because of the situation in Venezuela are not expected. Oil will still cost 55—65 $ for a barrel.

3 ways of course of events

Oil prices can either increase or decrease, depending on the further political situation in Venezuela:

  1. If the struggling between Maduro and opposition continues for a long time, the oil production in this South-American country will decline, and the prices will increase. It will be not really good for European countries, which purchase oil, but it will be very favourable for Russia and USA — the world major suppliers of this commodity.
  2. If Maduro resigns or is overthrown, the situation in Venezuela will be stabilized, and the prices will not change.
  3. If Maduro retires or is brought down, and his place is overtaken by a politician with more market-oriented views, there can increase a level of oil production. It can create a surplus of this commodity on the world market, and the value will drop.

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