Oil prices rose on Tuesday after the US government imposed new sanctions against Venezuela after President Nicolas Madura was re-elected in the South American country on Sunday. Associated Press photo by Ariana Cubillos.
Oil prices slip back below $80/barrel during session
Oil prices topped $80/barrel on Tuesday as analysts and investors grew concerned that Trump administration sanctions threatened against both Venezuela and Iran will further tighten the global supply of crude.
By 12:48 p.m., EDT, Brent crude futures were up 43 cents to $79.65/barrel and US West Texas Intermediate futures fell 5 cents to $72.430/barrel. The Canadian Crude Index dipped 25 cents to $51.62/barrel.
After Sunday’s presidential vote in Venezuela where President Nicolas Maduro was re-elected, the US government imposed new sanctions on the South American OPEC nation. Analysts say the decision could further curb Venezuela’s crude output, which already sits at its lowest point in decades.
“The impact is more fear-related that we’ll see more barrels come off the market,” Rob Haworth, senior investment strategist for U.S. Bank Wealth Management told Reuters.
As well, analysts remain concerned that the Trump administration’s decision to abandon the Iran sanction relief deal will further impact crude supplies.
On Monday, Iran dismissed an ultimatum issued by the Trump government demanding Tehran drop its nuclear program and pull out of the Syrian war or face severe economic sanctions. One senior Iranian official told Reuters that the threat showed the US is seeking “regime change” in Iran.
The drastic decline in Venezuelan production has resulted in OPEC over-delivering on its supply cut pact pledges. Saudi Arabia and other major OPEC producers could boost their supply to make up for the production losses, but have not yet done so.
After OPEC began operating under the cartel’s supply cut agreement in January 2017, the global over supply of crude that resulted in the drastic drop of oil prices to under $30/barrel has all but been cleared.
On Tuesday afternoon, the American Petroleum Institute will release its US crude stocks data and on Wednesday morning, the US Energy Information Administration will report its data on oil inventories.
Rising US production is impacting oil prices as shale output is forecast to hit a record high next month.