Oil edged lower as the US eased crude sanctions against Venezuela, denting some of the price gains spurred by the devastating conflict in the Middle East.
(Bloomberg) — Oil edged lower as the US eased crude sanctions against Venezuela, denting some of the price gains spurred by the devastating conflict in the Middle East.
Global benchmark Brent dropped as much as 2.1%, dipping below $90 a barrel, before paring those declines. The US suspended some sanctions on Venezuela’s oil and other commodities in response to the signing of an electoral roadmap agreement between the government of President Nicolas Maduro and the opposition.
Analysts estimate that the US shift in position may enable the South American country to pump 200,000 more barrels a day, a roughly 25% jump in output that will add barrels to a tight market.
US President Joe Biden plans an Oval Office address on the Middle East crisis on Thursday amid a drive to prevent the conflict from escalating. It follows a brief midweek visit to Israel to show solidarity following the attack by Hamas.
Oil has been volatile since the Oct. 7 assault on Israel by Hamas, which is designated as a terrorist organization by the US and European Union. There are concerns that an expected ground offensive by Israel into Gaza could prompt a more aggressive response from Iranian-backed Hezbollah in southern Lebanon and embroil wider regional powers. Worries that the conflict could affect fuel flows have countered the ongoing drag from higher interest rates around the world.
“The sting was taken out of the rally by the US easing Venezuelan sanctions,” said Tamas Varga, an analyst at brokerage PVM Oil Associates Ltd. Still, “the ongoing hostility in the Middle East has raised the price floor to around $85 a barrel basis Brent.”
Iran has appealed for an oil boycott against Israel as Jerusalem ramps up pressure against Hamas in Gaza. Citigroup Inc. said Israel’s main suppliers, including Kazakhstan and Azerbaijan, were unlikely to follow such a call.
US data, meanwhile, pointed to tight physical markets. Holdings of crude at Cushing, Oklahoma — the delivery point for US benchmark crude West Texas Intermediate — dropped by more than 700,000 barrels last week to hit the lowest level since 2014.
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