00:00 Julie
Let’s go back to the oil market as oil has rebounded after hitting its lowest level since 2021. Crude oil prices fell below $55 per barrel on Tuesday. And it comes after President Trump ordered a blockade of approved oil tankers entering and leaving Venezuela. Jake Conley of Yahoo Finance has been tracking it all. Jake, you were talking about, I mean, just yesterday we were talking about prices below 2021. And now President Trump, um, kind of changes the calculus. Let’s see, what effect does it have? Talk us through it.
00:43 Jake Conley
Yes, that’s why you look at prices this morning. WTI, the US benchmark, is up about 1.3% after a 2% jump. Brent, the international benchmark, same thing. Apparently a reversal from yesterday’s almost drop of 3%. The inciting event here is blockade. Whether that has an impact or not, I think it’s going to play out over the next few days, but you look at it in the U.S., obviously there’s a little bit of a bounce in U.S. oil prices, but Venezuela only accounts for 1% of U.S. oil imports. So not really a big factor in the US market.
01:21 Jake Conley
Globally, it is also sitting on the world’s largest proven reserves. However, it is not a major global exporter. So again, whether it’s going to be a long tail or not, I think it’s hard to say.
01:34 Julie
And do we know about the tankers coming in and out of Venezuela, like how many of them have been sanctioned, you know, when we talk about sanctioned, what are we talking about? Russia mainly or what
01:50 Jake Conley
These are tankers that are involved in trade with Iran, some with Russia, some with China. It depends on the type, but you’re looking at about 100 plus for the volume of tankers that are probably going to be affected by this. In the last few days, we have seen four tankers bound for Venezuela turn around in the middle of the ocean and turn back. One of them was approved, three of them were not. So what you see is that even the companies that are not under the ban are already saying, I don’t know if I want to take this risk of ship cargo crew. Maybe it’s not worth it.
02:22 Julie
But to your point, broadly and as you and I have been talking about this in recent days, the broad supply demand picture is not positive for oil prices. This is great for people who drive and want low gas prices. Um, so how do we figure out how it fundamentally changes that picture? And obviously we don’t know for how long.
02:45 Jake Conley
Hmm. Yeah, that’s why I say it’s hard to keep up with the long tail of Venezuela news because the major market story, Julie, you’re right, is the huge wave of oversupply that’s coming down the pipe. The IEA has pegged about 3.8 million barrels per day next year, which will push prices if you look at street picks into the 50s, if OPEC doesn’t cut production, maybe even into the 40s or 30s, which will take a real hit on shale producers globally and here in the US.
03:22 Jake Conley
Whether the Venezuela news really has an impact depends on what happens next. Because it is an aggressive step forward. A few weeks ago, the US returned a crude oil tanker bound for Venezuela. A week ago they arrested one person. Now with this embargo, whether it has a long tail will really depend on what it signals to the market about US aggression, but that dominant story is the oversupply and this huge supply demand imbalance that we’re seeing.
03:55 Julie
When we see an uptick, I mean it’s only one day, but if we see an uptick, how quickly does that translate into US prices at the pump? Like what should we be looking at there or are they good or will they be too low?
04:12 Jake Conley
It’s hard to say how fast this will happen, but if you look at gasoline prices in the US, oil prices make up about 40 to 50% of that. So any meaningful jump will have an impact. How quickly that wave breaks out versus how well the market kind of adapts and says, well, there’s no tail here, prices go down. Very hard to say.
04:36 Jake Conley
But it could have an impact, especially if prices go up a bit. However, you talk to any analyst on the street, pretty much the consensus is they’re looking to lower prices over the next few months. So what the pump effect is, it’s very hard to say right now.
04:56 Julie
Yes, we will see when those events unfold in Venezuela. Thanks, Jake. Appreciate it.
05:01 Jake Conley
Thanks Julie.
