Venezuela Political Volatility: A Catalyst for Oil?

The United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, and the United States Brent Oil Fund (NYSEArca: BNO), which tracks Brent crude oil futures, along with other oil-related exchange traded products can be moved by geopolitical catalysts.

That scenario could be in store for oil traders amid increasing political volatility in Venezuela. Venezuela is an OPEC member and home to some of the world’s largest oil reserves.

“RBC Capital Markets’ Helima Croft says there’s a very high probability Venezuela’s state oil company will default and bring about a steep jump in crude prices,” reports CNBC. “According to Croft, it could be the catalyst to push oil prices to $70 to $80 a barrel by fall.”

Amid concerns that Venezuela’s recent election was no more than a sham that threatens the country’s ability to have any semblance of democracy, yields on some government debt there, including some issued by the state-controlled oil giant, have topped 100% and in some cases, 150%.

While the Organization of Petroleum Exporting Countries are skeptical that demand growth can put a dent into the ongoing supply glut, the oil cartel has made steps to cut down supply to bolster prices. OPEC has already promised to curb production by 1.2 million barrels per day between January this year and March 2018.