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Oil sluggish on news of Chavez death

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Shutterstock photo - Oil prices are showing an arguably surprising amount of lethargy in the early part of Wednesday's Asian session following news that Venezuelan President Hugo Chavez has passed away. The news broker after the close of U.S. markets Tuesday.

On the New York Mercantile Exchange, light, sweet crude futures for April delivery rose 0.17% to USD90.97 per barrel in Asian trading Wednesday. The contract settled at USD90.16 a barrel at the close of U.S. trading Tuesday, getting a small lift from some supportive economic data.

In U.S. economic news, the Institute for Supply Management said its February purchasing managers index rose to 56% from 55.2% in January. Economists expected the February reading to be unchanged from the prior month. The index has risen for 39 consecutive months.

Traders will now turn their attention to what plays out in Venezuela in the coming days. Vice President Nicholas Maduro will succeed Chavez, but new elections could be held in the coming months. Credit default swaps use to protect Venezuelan bonds against default surged following the news.

Venezuela, a member of the Organization of Petroleum Exporting Countries, is Latin America's largest oil producer. The country is also home to the largest oil reserves in the world, by some estimates as much as 256 billion barrels. Additionally, the country is home to the largest natural gas reserves in the Western hemisphere.

Despite all those resources, Venezuela has come nowhere close to fully exploiting its energy industry, which was nationalized before Chavez came to power. Chavez did nothing to help matters, making it difficult for Western oil companies to operate in his country.

With that in mind, some market participants are hopeful that Chavez's passing will lead to regime change in Venezuela, which in turn could lead to increased oil production there. Should all of that play out, oil prices would likely fall due to the increased supply, but that is not a scenario traders need to worry about in the near-term.

Elsewhere, Brent for April delivery added 0.48% to USD112.14 per barrel on the ICE Futures Exchange. - offers an extensive set of professional tools for the Forex, Commodities, Futures and the Stock Market including real-time data streaming, a comprehensive economic calendar, as well as financial news and technical & fundamental analysis by in-house experts.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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