Oil drops as worries about the Israel embargo subside and sanctions against Venezuela loosen

19 Oct 2023 , 09:54 AM

Thursday saw a decline in oil prices, reversing gains from the previous session, as the US prepared to lift sanctions against Venezuela in order to increase global oil supply and as OPEC showed no indications of endorsing Iran’s demand for an oil embargo.

December Brent futures dropped 74 cents to $90.76 per barrel. The November contract for U.S. West Texas Intermediate (WTI), which expires on Friday, decreased by 57 cents to settle at $87.75 a barrel. The more volatile December WTI was down 51 cents to $86.76 per barrel.

The world’s largest oil consumer, the United States, reported a larger-than-expected inventory draw, adding to already tight supplies. Iran called for an oil embargo on Israel over the Gaza conflict, and these developments sparked concerns about disruptions to global supplies, which caused oil prices to rise by about 2% in the previous session.

According to sources who spoke to Reuters, the Organisation of the Petroleum Exporting Countries (OPEC) has decided not to respond to Iran’s appeal with any swiftness, allaying worries about possible interruptions to oil supplies.

Following an agreement between the government and the opposition in Venezuela to guarantee free and fair elections in 2024, the US granted a six-month licence allowing transactions in the country’s energy sector, which is an OPEC member.

With the Israel-Hamas conflict, sanctions against Russia, and moves by OPEC+ to restrict output, Venezuela’s oil flows may contribute to a reduction in global oil prices; nevertheless, in order to increase output after years of sanctions, the country needs investments.

The Energy Information Administration reports that due to increased demand for heating oil and diesel, U.S. crude oil and fuel inventories decreased last week. According to EIA data, distillate fuel stockpiles decreased by 3.2 million barrels to 113.8 million barrels in the week ending October 13.

The number of barrels in crude and petrol inventories decreased by 4.5 and 2.4 million, respectively, to 419.7 and 223.3 million barrels, respectively.

According to sources who spoke to Reuters, supply may become even more constrained in November as domestic refineries anticipate raising output as seasonal maintenance comes to an end, resulting in a 300,000 bpd decline in oil exports from Russia via its western sea ports.

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