Oil moved higher as traders digested a mix of geopolitical risks that could add a premium to prices while continuing to assess US measures to exert control over Venezuela’s oil.
West Texas Intermediate rose 3.2% to settle below $58 a barrel. Prices continued to climb after settlement, rising more than 1% and leaving the market poised to wipe out losses from earlier in the week.
President Donald Trump threatened to hit Iran “hard” if the country’s government killed protesters amid an ongoing period of unrest. A disruption to Iranian supply would prove an unexpected hurdle in a market that’s currently anticipating a glut of oil.
Adding to the bullish momentum, an annual period of commodity index rebalancing is expected to see cash flow back into crude over the next few days. Call skews for Brent have also strengthened as traders pile into the options market to hedge.
And entering the day, trend-following commodity trading advisers were 91% short in WTI, according to data from Kpler’s Bridgeton Research group. That positioning can leave traders rushing to cover shorts in the event of a price spike.
The confluence of bullish events arrived as traders were weighing the US’s efforts to control the Venezuelan oil industry. Energy Secretary Chris Wright said the US plans to control sales of Venezuelan oil and would initially offer stored crude, while the Energy Department said barrels already were being marketed.
State-owned Petroleos de Venezuela SA said it’s in negotiations with Washington over selling crude through a framework similar to an arrangement with Chevron Corp., the only supermajor operating in the country.
Meanwhile, President Donald Trump told the New York Times that US oversight of the country could last years and that “the oil will take a while.”
“We are really talking about a trade-flow shift as the main repercussion of what’s going on there,” Amrita Sen, co-founder and director of research at Energy Aspects, said in a Bloomberg Television interview. “You’re going to see more oil go to the US at the expense of China, but not necessarily significant increases in Venezuelan production.”
Venezuela Updates
Citgo Petroleum Corp., the US refiner indirectly owned by Venezuela, is considering resuming purchases for the first time since sanctions cut off its supply in 2019, while Trafigura Group has also expressed interest. Chevron is in talks to extend its license to operate in the country, and Reuters reported that Vitol Group has received a preliminary US license for oil talks.
ConocoPhillips, Exxon Mobil Corp. and other US oil companies are also examining what role they can play in helping revitalize Venezuela’s energy industry, Wright said following talks with executives.
On Tuesday, Trump said Venezuela would relinquish as many as 50 million barrels to the US, worth more than $2 billion, and announced cargoes would be sold with proceeds to benefit both nations. Revenue from sales will be held in US Treasury accounts, according to a person familiar with the matter.
China has been the main buyer of Venezuelan oil, which was heavily discounted following US sanctions. The nation will not be cut off from purchasing Venezuelan oil, Wright said.
Oil Prices
WTI for February delivery climbed 3.2% to settle at $57.76 a barrel in New York.
Brent for March settlement rose 3.4% to settle at $61.99.
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