Oil extended gains as a new wave of U.S. sanctions on Venezuela stoked concerns over its crude production and as analysts forecast further declines in American stockpiles.
Futures in New York added as much as 0.4 percent after U.S. President Donald Trump ordered sanctions on debt owed to Venezuela after the Latin American country’s President, Nicolas Maduro, won a second term in an election that raised scorn from the international community. Meanwhile, crude inventories in the U.S. are forecast to fall for a third week in a Bloomberg survey before government data due Wednesday.
Oil is trading near the highest level since 2014 as geopolitical tensions, U.S. sanctions on Iran and plunging production in OPEC-producer Venezuela raise concerns over supply. The Organization of Petroleum Exporting Countries continues to tighten global inventories with output cuts due to last until the end of the year. The International Energy Agency said it expects some of the biggest oil-producing nations to meet any shortfalls.
“Bullish factors are everywhere,” Takayuki Nogami, chief economist at state-backed Japan Oil, Gas & Metals National Corp., said by phone from Tokyo. “OPEC tends to show a willingness to monitor the markets, but is slow to take action. The market is aware of that and doesn’t expect OPEC to act swiftly and cool down prices.”
Oil Prices
West Texas Intermediate for June delivery, which expires Tuesday, climbed as much as 31 cents to $72.55 a barrel on the New York Mercantile Exchange and traded at $72.44 at 1:12 p.m. in Tokyo. The more-active July contract rose 15 cents to $72.50. Total volume traded was about 39 percent below the 100-day average.
Brent futures for July settlement added as much as 26 cents to $79.48 a barrel on the London-based ICE Futures Europe exchange. The contract on Monday gained 0.9 percent to $79.22. The global benchmark crude traded as at $6.83 premium to WTI for the same month.
Yuan-denominated futures climbed 0.6 percent to 485.5 yuan a barrel in morning trading on the Shanghai International Energy Exchange. The contract fell 0.8 percent on Monday.
Trump issued an order prohibiting purchases of debt owed to the Venezuelan government including Petroleos de Venezuela SA, the Latin American nation’s state-owned oil company. The order follows the first wave of restrictions last year that banned the purchase of new debt from the government.
Supply Risks
Venezuelan crude output may drop below 1 million barrels per day in the coming months from an April level of 1.5 million, Barclays Plc said in a May 18 report, when it raised its forecast for Brent to $70 per barrel from its previous outlook of $63.
The IEA started discussions with major oil producing countries about their ability “to make up the loss from Venezuela or elsewhere,” Executive Director Fatih Birol said in a Bloomberg Television interview. The Paris-based agency, as an energy security organization, is “ready to act if and when it is at all necessary,” Birol said.
In the U.S., crude inventories probably fell by 2 million barrels last week, according to the Bloomberg survey of analysts. Stockpiles at the key pipeline and storage hub in Cushing, Oklahoma, are estimated to have declined by 250,000 barrels, according to a forecast compiled by Bloomberg.
Other oil-market news:
U.S. Secretary of State Mike Pompeo demanded that Iran halt all uranium enrichment, stop its ballistic-missile program and give nuclear inspectors access to the entire country. President Donald Trump retreated from imposing tariffs on billions of dollars worth of Chinese goods because of White House discord over trade strategy and concern about harming negotiations with North Korea. The five-year Brent forward price has jumped over the last month, outpacing the gains in spot prices.
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