A slide in Wall Street shares also weighed on oil.
"The quickly devolving situation in Venezuela appears to be approaching some type of tipping point", Helima Croft, RBC's global head of commodity strategy, wrote to clients on Wednesday. Venezuela's GDP has plunged by 37% between 2012 and 2017, according to the International Monetary Fund. Wider sanctions - such as those already aimed at buyers of Iranian oil - could tip the market into deficit and leave it lopsided in other crucial ways. That's because Venezuela's oil shipments to China and Russian Federation are usually taken as repayment for billions of dollars in debts.
But McMonigle, now senior energy policy analyst at Hedgeye Potomac Research, believes Trump is very likely to impose sanctions.
Venezuelan output has been hampered by chronic under investment by the nationalized oil company Petroleos de Venezuela SA (PdVSA).
"It could lead to all of its oil production going offline and chaos in the country", said McMonigle.
"The scarcity of heavy oil in the Gulf Coast will increase the price, plus the fact that you have to import from a place like Iraq, makes it a little costlier", Monaldi said.
Cut runs, and that will put downward pressure on oil prices even if geopolitical fears are pushing the other way (remember, refiners, not you and me, are the ones who buy crude oil).
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The problem is that even though USA oil production has skyrocketed to record highs, America is not self-sufficient.
Fogwill said limited pipeline capacity and rising demand for Canadian crude at those refineries is one reason why rail shipments of oil to the United States have been on the rise.
Despite these efforts, oil remains in ample supply, not least because of soaring USA crude oil production, which jumped by more than 2 million bpd past year to a record 11.9 million bpd.
Venezuela's oil is predominantly heavy crude, which requires extensive refining, and as such, is frequently blended with lighter crudes to give refiners higher-value products. The only countries that sent more crude to the United States were Canada, Saudi Arabia and Mexico. The Trump administration has drafted a slate of potential restrictions on Venezuelan crude exports but hasn't decided whether to deploy them, according to people familiar with the matter.
Total products supplied over the last four-week period averaged 20.3 million barrels per day, down by 1.1 percent from the same period past year.
USA refiners "will need to hustle to secure alternate foreign crude oil supplies to replace short-haul Venezuelan heavy sour with Mexico and the Middle East such as Iraq and Saudi Arabia being the most logical replacements", said John Driscoll, the chief strategist at JTD Energy Services Pte Ltd.
If a new government comes to power, it could change Venezuela's oil industry for the better. In the first 10 months of 2018, Citgo imported the most Venezuelan crude followed by Valero Energy Corp., Bloomberg reported. If this support fails then look for the selling to continue into $56.65.