Oil slips as Venezuela sanctions ease, Middle East in focus

Pumpjacks are seen during sunset at the Daqing oil field in Heilongjiang province, China. REUTERS/Stringer/File photo

LONDON  -Oil prices fell about 2 percent on Thursday as the United States eased sanctions on Venezuela to allow more oil to flow globally, but fears that Israel’s military campaign in Gaza may escalate to a regional conflict kept a lid on losses.

Brent futures for December were down $1.52, or 1.7 percent, to $89.98 a barrel at 0913 GMT. U.S. West Texas Intermediate (WTI) futures for November, which expire on Friday, stood at $87.07 per barrel, down $1.25, or 1.4 percent.

The more active December WTI contract fell 1.6 percent, or $1.38, to $85.89 a barrel.

The United States issued a six-month license authorizing transactions in Venezuela’s energy sector, an OPEC member, after a deal was reached between Venezuela’s government and the political opposition there to ensure fair 2024 elections.

The deal is not expected to quickly expand Venezuela’s oil output but could boost profits by returning some foreign companies to its oilfields and providing its crude to a wider set of cash-paying customers, experts said.

READ: Oil up about 2% on big US crude storage draw, Middle East tension

Oil prices climbed about 2 percent in the previous session on concerns about disruptions to global supplies after Iran called for an oil embargo on Israel over the conflict in Gaza and after the U.S., the world’s biggest oil consumer, reported a larger-than-expected inventory draw, adding to already tight supplies.

The Organization of the Petroleum Exporting Countries (OPEC) is not planning to take any immediate action on OPEC member Iran’s call, sources told Reuters, easing concerns over potential disruptions.

READ:  OPEC plans no immediate action after Iran urges Israel oil embargo -sources

“Although OPEC shows no indication of taking up Iran’s call to impose an oil boycott on Israel, oil will almost certainly become a feature of the conflict in several ways,” RBC Capital Markets analyst Helima Croft said.

“At a minimum, the prospect of Saudi Arabia phasing out its 1 million barrel per day (bpd) unilateral production cut as part of a grand bargain that would include Israel normalization is off the table for now,” Croft said, referring to recent talks over Saudi Arabia potentially normalizing relations with Israel.

Saudi Arabia had said it would keep its voluntary cut until the end of the year.

Japan, the world’s fourth-largest crude buyer, on Thursday urged Saudi Arabia and other oil producing nations to increase supplies to stabilize the global oil market, as rising fuel prices amid the conflict could impact the global economy.

U.S. crude oil and fuel inventories dropped last week on rising demand for diesel and heating oil, according to data from the Energy Information Administration (EIA). Distillate fuel stockpiles fell by 3.2 million barrels in the week to Oct. 13 to 113.8 million barrels, EIA data showed.

Crude inventories fell by 4.5 million barrels to 419.7 million barrels, while gasoline fell by 2.4 million barrels to 223.3 million barrels.