Oil extended gains as a new wave of US 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 US 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 US are forecast to fall for a third week in a Bloomberg survey before government data due on Wednesday.
Oil is trading near the highest level since 2014 as geopolitical tensions, US 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.”
West Texas Intermediate for June delivery, climbed as much as 32 cents to $72.56 a barrel on the New York Mercantile Exchange and traded at $72.55 at 3:53 p.m. in Tokyo. The more-active July contract rose 26 cents to $72.61. Total volume traded was about 37 percent below the 100-day average.
Brent futures for July settlement added as much as 27 cents to $79.49 a barrel on the London-based ICE Futures Europe exchange. The contract gained 0.9 percent to $79.22. The global benchmark crude traded as at $6.85 premium to WTI for the same month. Yuan-denominated futures climbed 0.6 percent to 485.3 yuan a barrel on the Shanghai International Energy Exchange. The
contract fell 0.8 percent.
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.
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.