UK transport fuels shed around 1ppl in January, but the losses are expected to be short-lived, as international oil markets climbed steadily through the month in response to the US sanctions against oil-rich Venezuela.

After shedding more than $30/bl in 2018 to end the year at around $53/bl, benchmark Ice Brent crude oil futures closed January out at $61.89/bl. The premium for diesel to petrol at the pumps held steady at nearly 10ppl with oil traders putting the historically high delta between the two down to gasoline weakness rather than particularly tight diesel markets.

The US slapped sanctions on Venezuela as part of a campaign of financial and diplomatic pressure designed to force President Nicolas Maduro from power. Maduro has shown defiance at the sanctions and looks likely to divert exports for the US to China, India and elsewhere. "We do not need the gringo market," noted an official at the Maduro-controlled oil ministry. However, the country is already close to collapse, battling hyper-inflation and civil unrest.

The fresh sanctions arrive on top of existing ones against OPEC heavyweight Iran, imposed by the US, although their effect was diluted by a series of waivers for some customers. The US had been expected to cancel some of these waivers but will be forced to think again if the Venezuelan situation does not improve fast as this would take too much oil out of the market, too fast to prevent a price surge. Early indications are that Saudi Arabia is making good on its promise at the last OPEC meeting to cut production with January exports down 560,000 bl/day on the previous month.

Rotterdam spot gasoline markets have responded to higher crude, but margins are negative for refiners with gasoline selling at a $4/bl discount to crude oil. Demand should pick up in the spring, but stocks in the Amsterdam hub are at their highest since 2010. The main market for European gasoline is the US, but stocks there are at record highs. There is still scope for petrol to fall relative to diesel at the pump with the gap between them much wider on the spot markets than the 10ppl on the forecourt.

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