Oil prices retreated on Thursday, reversing the gains seen in the previous session. This shift followed indications that OPEC was not inclined to support Iran’s proposal for an oil embargo on Israel, and the United States’ plans to relax sanctions on Venezuela, thereby increasing the global oil supply.
Brent futures for December experienced a 0.3% decrease, amounting to 29 cents, resulting in a price of $91.21 per barrel. Meanwhile, U.S. West Texas Intermediate (WTI) futures for November, which are set to expire on Friday, remained nearly unchanged at $88.34 per barrel, up by 2 cents from the previous settlement.
The more active December WTI contract observed a 0.2% decline, equivalent to 13 cents, to reach $87.14 per barrel at 0645 GMT.
The previous session had seen oil prices rise by approximately 2%. These gains were attributed to concerns about potential disruptions in global supplies following Iran’s call for an oil embargo on Israel due to the conflict in Gaza. Additionally, the world’s largest oil consumer, the United States, reported a larger-than-expected inventory draw, contributing to concerns regarding already tight supplies.
Reports from sources indicated that the Organization of the Petroleum Exporting Countries (OPEC) did not have immediate plans to respond to Iran’s request, alleviating concerns regarding potential supply disruptions.
Israel imports about 250,000 barrels per day (bpd) of oil, primarily from Kazakhstan, Azerbaijan, Iraq, and African countries, according to analysts from Citi. They remarked, “We believe an embargo from Kazakhstan and Azerbaijan, strong Israeli allies, is unlikely.”
Furthermore, the conclusion of U.S. President Joe Biden’s visit to Israel without further escalation in the Israel-Hamas conflict led to some retracement in oil prices, according to CMC Markets analyst Tina Teng. However, she highlighted that the market remains under upward pressure due to ongoing geopolitical tensions.
Nevertheless, oil prices were impacted by the announcement of a six-month license issued by the United States to authorize transactions in Venezuela’s energy sector. Venezuela, an OPEC member, had reached an agreement between the government and the political opposition to ensure fair elections in 2024.
The increase in Venezuela’s oil flows could help alleviate rising global oil prices, attributed to the Israel-Hamas conflict, sanctions on Russia, and OPEC+ decisions to reduce output. However, Venezuela requires investments to enhance production after years of sanctions.
Japan, the fourth-largest global crude buyer, called on Saudi Arabia and other oil-producing nations to boost supplies in order to stabilize the global oil market, as escalating fuel prices amid the conflict could impact the global economy.
Data from the Energy Information Administration revealed a decrease in U.S. crude oil and fuel inventories last week due to rising demand for diesel and heating oil. Distillate fuel stockpiles decreased by 3.2 million barrels in the week ending October 13, reaching 113.8 million barrels, as per EIA data.
Crude inventories fell by 4.5 million barrels to 419.7 million barrels, while gasoline inventories declined by 2.4 million barrels to 223.3 million barrels.
Moreover, it is anticipated that Russia’s oil exports via its western sea ports will decrease by approximately 300,000 bpd in November, as domestic refineries are expected to increase runs following the conclusion of seasonal maintenance, as reported by sources to Reuters.