Oil advanced as the US intensified a blockade on Venezuela, with American forces boarding one tanker and pursuing another within weeks of capturing a vessel.
West Texas Intermediate rose 2.4% to settle above $58 a barrel on Monday after two weekly declines. The US Coast Guard boarded the Centuries tanker in the Caribbean on Saturday, which was carrying up to 2 million barrels of Venezuelan crude. It was the first non-sanctioned vessel to be targeted. As of Sunday, US forces were also in pursuit of the Bella 1, which was en route to Venezuela.
Washington has been stepping up pressure on Nicolas Maduro’s government, with President Donald Trump aiming to choke off its key revenue stream. The US has designated the regime a foreign terrorist organization, accusing it of involvement in drug trafficking. Venezuela has rejected those accusations, saying the US is in pursuit of its natural resources. Venezuela still has the world’s largest crude reserves, but its exports, most of which go to China, now account for less than 1% of global demand.
There were also heightened risks to supplies from another member of the OPEC+ producer group after Ukraine hit an oil tanker from Russia’s shadow fleet in the Mediterranean Sea with drones for the first time. That followed strikes on Lukoil PJSC facilities in the Caspian Sea.
Geopolitical risks have helped put a floor under oil prices, which have dropped by about a fifth this year. The declines have been driven by oversupply as both OPEC+ and the group’s competitors raised production amid slowing demand growth.
The military activity near Venezuela should do little to change expectations of a surplus, or the long negative trajectory of prices, said Bob McNally, president of Rapidan Energy Group.
“We’ve been telling clients for some time to expect crude’s downward trend driven by developing, hefty surpluses to be punctuated by brief spikes on geopolitical headlines, as they have been since June,” McNally said. “But we don’t expect any of these to materially disrupt oil production and flows. So after catalyzing short covering rallies of $1-$2 (Israel-Iran was much bigger) prices should continue their downward grind.”
Trend-following commodity advisers remain 100% short in both Brent and WTI, according to data from Bridgeton Research Group, which was recently acquired by Kpler.
Oil Prices
WTI for February delivery rose 2.4% to settle at $58.01 a barrel in New York.
Brent for February settlement rose 2.7% to settle at $62.07 a barrel.
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