Oil prices fell around 2% on Thursday as the US removed sanctions on Venezuela, allowing more oil to flow globally, but fears that Israel’s military incursion in Gaza may develop into a regional conflict kept losses in check.
Brent December futures were down $1.52, or 1.7%, at $89.98 per barrel at 0913 GMT. WTI futures in the United States for November, which expire on Friday, were $87.07 per barrel, down $1.25, or 1.4%.
The more active December WTI contract fell 1.6%, or $1.38, to $85.89 a barrel.
The United States issued a six-month licence authorising transactions in Venezuela’s energy sector, an OPEC member, after a deal was reached between Venezuela’s government and the political opposition there to ensure fair 2024 elections.
The deal is not expected to quickly expand Venezuela’s oil output but could boost profits by returning some foreign companies to its oilfields and providing its crude to a wider set of cash-paying customers, experts said.
Oil prices climbed about 2% in the previous session on concerns about disruptions to global supplies after Iran called for an oil embargo on Israel over the conflict in Gaza and after the U.S., the world’s biggest oil consumer, reported a larger-than-expected inventory draw, adding to already tight supplies.
The Organization of the Petroleum Exporting Countries (OPEC) is not planning to take any immediate action on OPEC member Iran’s call, sources told Reuters, easing concerns over potential disruptions.
“Although OPEC shows no indication of taking up Iran’s call to impose an oil boycott on Israel, oil will almost certainly become a feature of the conflict in several ways,” RBC Capital Markets analyst Helima Croft said.
“At a minimum, the prospect of Saudi Arabia phasing out its 1 million barrel per day (bpd) unilateral production cut as part of a grand bargain that would include Israel normalization is off the table for now,” Croft said, referring to recent talks over Saudi Arabia potentially normalising relations with Israel.
Saudi Arabia had said it would keep its voluntary cut until the end of the year.
Japan, the world’s fourth-largest crude buyer, on Thursday urged Saudi Arabia and other oil producing nations to increase supplies to stabilise the global oil market, as rising fuel prices amid the conflict could impact the global economy.
U.S. crude oil and fuel inventories dropped last week on rising demand for diesel and heating oil, according to data from the Energy Information Administration (EIA). Distillate fuel stockpiles fell by 3.2 million barrels in the week to Oct. 13 to 113.8 million barrels, EIA data showed.
Crude inventories fell by 4.5 million barrels to 419.7 million barrels, while gasoline fell by 2.4 million barrels to 223.3 million barrels.