Oil Market Drops 1% as US May Ease Sanctions on Venezuela
By Adedapo Adesanya
The oil market fell by one per cent on Monday after expectations rose that the United States could ease sanctions on Venezuelan crude exports.
Venezuela, a member of the Organisation of the Petroleum Exporting Countries (OPEC) could begin to heave a sigh of relief as government and opposition are set to return to political negotiations this week after nearly a year.
This development weakened Brent crude by 1.4 per cent or $1.24 during the session to $89.65 a barrel, as the US West Texas Intermediate (WTI) crude dropped 1.2 per cent or $1.03 to finish at $86.66 a barrel.
It was reported that the US reached a preliminary deal to ease sanctions on Venezuela’s oil industry in return for a competitive, monitored presidential election in Venezuela next year.
The initial steps by US President Joe Biden’s administration would involve only limited sanctions relief for now. Much of the far-reaching sanctions programme imposed by the administration of former President Donald Trump in 2019 under a “maximum pressure” policy would remain.
Meanwhile, traders said the Israel-Hamas conflict did not appear to threaten oil supplies in the short term.
Both oil benchmarks had surged last week on fears the conflict in the Middle East could widen, with global benchmark Brent gaining 7.5 per cent in its highest weekly gain since February.
Market analysts said Monday’s falling prices appeared to serve as a breather to take in events in the Middle East as opposed to expected production increases in Venezuela.
In Israel, some estimates put the death toll at around 1,400 since Hamas launched its attack on October 7, while the death toll in Gaza is said to be around 2,750.
On Friday, the Israel Defense Forces (IDF) ordered the evacuation of all civilians from Gaza City, and on Monday, reports said the Israelis were preparing to evacuate citizens near the border with Lebanon.
Although the attack has had no effect on the oil supply so far, the possibility of other players coming into the conflict could drive a surge to the premium.
Russian President Vladimir Putin is set to hold talks with Iran, Israel, Palestinians, Syria, and Egypt.
The US last week imposed the first sanctions on owners of tankers carrying Russian oil priced above the Group of Seven’s price cap of $60 a barrel. This is an effort to close loopholes in the mechanism designed to deprive Russia of revenue for its energy sales, which it believes it is using to fund the aggression on Ukraine.