Oil declined on the prospect of increased Venezuelan crude sales after US forces seized two more sanctioned tankers and said it is already marketing some of the country’s supply.
West Texas Intermediate fell 2% to settle just below $56 on Wednesday on expectations that an uptick in sales of Venezuelan barrels will put downward pressure on prices in an already oversupplied market.
US President Donald Trump said late Tuesday that Venezuela’s interim government agreed to give as many as 50 million barrels of “high quality, sanctioned oil” to the US. Trump has said the US wants full access to Venezuela’s oil following the arrest of former President Nicolas Maduro by US forces over the weekend.
In addition to marketing Venezuelan crude, the US is working with banks and commodity houses to execute trades, according to a fact sheet released by the Department of Energy. Meanwhile, lighter grades of US oil are being dispatched to “upgrade and optimize” Venezuela’s sludgy crude for export, the agency said.
The Trump administration is selectively rolling back sanctions against the South American nation, the department said without providing specifics.
It’s a set of moves that, in effect, makes the US one of the world’s most powerful traders of crude oil.
“We’re going to let the oil flow,” Energy Secretary Chris Wright said at a Goldman Sachs Group Inc. conference on Wednesday. Barrels will be sold “to US refineries and around the world to bring better oil supplies.”
Oil has lost ground since the start of the year, following its worst annual slump since 2020. Amid the backdrop of a global glut, prices could have significant runway to weaken.
In recent sessions, the US benchmark struggled to rally past $58.50, a key level of resistance, according to Fawad Razaqzada, a market analyst at Forex.com. If prices decline further and breach the key psychological and technical level of $55, which has held since April, futures could accelerate a slide to $50.
Trend-following commodity trading advisers shifted positions to 91% short in WTI from 63%, according to data from Kpler’s Bridgeton Research Group.
To be sure, plenty of geopolitical-risk premium remains, including from the US capture of foreign oil tankers.
But significant amounts of Venezuelan oil potentially entering the market offers long-term bearish momentum. The country was once a crude powerhouse, but output has slumped over the past two decades and now represents 1% of global supplies as the country’s infrastructure has atrophied amid underinvestment.
The US will not take Venezuela’s oil, Wright said in a later interview on CNBC, but it will control the flow of the proceeds and use them to “fix” the country’s economy.
Trafigura Group and other traders will hold talks with the US about how they can return to buying Venezuelan oil as Trump is set to meet with energy executives at the White House within the next week.
The latest weekly oil report by the US government showing a sizable increase in US refined product stockpiles last week — and a 3.8-million-barrel draw in crude stocks — did little to move prices on a day dominated by geopolitics.
Oil Prices
WTI for February dropped 2% to settle at $55.99 a barrel in New York.
Brent for March settlement fell 1.2% to settle at $59.96.
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