The price of oil jumped to a two-month high on Monday, following reports that the US government could hit Venezuela with sanctions in the wake of the election held over the weekend.
U.S. West Texas Intermediate (WTI) futures briefly jumped over $50 per barrel in early trading, with Brent crude hitting its highest level since late May at $52.85 per barrel. Prices have since calmed however, with WTI currently trading down 0.08 percent at $49.67 and Brent down 0.08 percent at $52.18.
The United States said it was considering imposing sanctions on Venezuela’s oil sector, a vital provider of income for the country, after denouncing Sunday’s election as a “sham” vote. The country went to the polls in the midst of a political and economic crisis, to vote on whether president Nicolás Maduro could replace Venezuela’s current legislative body with a new institution that will have the power to rewrite the constitution.
If sanctions are imposed the effects will be severe for Venezuela, with oil being one of the country’s largest industries. According to RBC Capital Markets, it is already facing severe difficulties:
“By the end of the 2017, the Venezuelan economy will likely have shrunk by 30 percent in three years. The IMF forecasts that inflation will average 720 percent this year and top 2,000 percent in 2018. Half of the population is living in extreme poverty and health officials are even starting to warn of famine if current trends continue, according to the International Crisis Group.”