This post was originally published on this site
Crude oil futures fell Thursday, giving back much of the previous session’s strong gains, after the U.S. agreed to ease sanctions on Venezuela’s oil and gas sectors, though jitters remain over a potential spread of the Israel-Hamas war.
Price action
-
West Texas Intermediate crude for November delivery
CL.1,
-0.72% CLX23,
-0.72%
fell $1.23, or 1.4%, to $87.09 a barrel on the New York Mercantile Exchange. December WTI
CL00,
-0.72% CLZ23,
-0.72% ,
the most actively traded contract, was off $1.27, or 0.5%, at $86 a barrel. -
December Brent crude
BRN00,
-0.86% BRNZ23,
-0.86% ,
the global benchmark, declined $1.41, or 1.5%, to $90.09 a barrel on ICE Futures Europe.
Market drivers
The U.S. Treasury late Wednesday issued a six-month general license that would temporarily authorize transactions involving Venezuela’s oil and gas sector, another that authorizes dealings with Minerven — the state-owned gold mining company — and removed the secondary trading ban on certain Venezuelan sovereign bonds. The temporary relaxation of sanctions came after the government of Venezuelan President Nicolás Maduro and a faction of its opposition agreed to work together to reach a series of basic conditions for the next presidential election.
The easing of sanctions is seen “providing some relief to the supply-side pressures that have supported the recent price rises,” said Ricardo Evangelista, senior analyst at ActivTrades, in a note.
A deal paves the way for a medium-term increase in production, though the potential expansion is hindered by the prolonged lack of investments in the industry, said Sofia Guidi Di Sante, senior oil analyst at Rystad Energy, in a Tuesday note.
“In the short term — six months after sanctions are lifted — production could only ramp up by a maximum of 200,000 barrels per day; a relative drop in the ocean on the global stage,” she said.
Earlier: Venezuela is set for a ‘long journey’ to boost oil output if U.S. eases sanctions
Meanwhile, the market has calmed after a sharp gain the previous session that took crude to its highest since the Oct. 7 Hamas attack on Israel. Wednesday’s jump came after a blast at a Gaza hospital prompted Iran to call for an OPEC embargo against Israel and stoked fears the Israel-Hamas war could spread, threatening oil supplies. Reuters subsequently reported that OPEC had no plans for an immediate response.
The stabilization of oil prices “can be seen as a case of no news is good news. The situation remains critical and continues to threaten to involve the Middle East in a wider conflict, a scenario that could disrupt the global supply of crude. But, so far, there has been no escalation, and the nerves of oil traders seem to have calmed,” Evangelista said.
See: There’s less to oil-price spike than meets the eye as Israel-Hamas war worries rise
