Oil prices experienced a 2% decline on Thursday following the United States’ decision to ease sanctions on Venezuela.
However, apprehensions of Israel’s military campaign in Gaza escalating into a regional conflict served as a dampener on the market.
Brent crude oil, against which Nigerian oil is priced, dropped by $1.52, or 1.7% to $89.98 a barrel while U.S. West Texas Intermediate (WTI) declined by $1.25, or 1.4% to close at $87.07 per barrel.
The U.S. issued a six-month license, permitting transactions in Venezuela’s energy sector after a historic agreement between the Venezuelan government and political opposition to ensure fair 2024 elections.
Although this move may not lead to an immediate surge in Venezuela’s oil output, it is expected to attract foreign companies back to the country and expand its customer base.
Previously, oil prices had surged by about 2% due to concerns over global supply disruptions following Iran’s call for an oil embargo on Israel.
Simultaneously, the U.S., the world’s largest oil consumer, reported a substantial inventory draw, further tightening supplies.
While OPEC remains hesitant to act on Iran’s call, the situation remains fluid. Analysts, like Helima Croft of RBC Capital Markets, speculate that oil could still play a significant role in the ongoing conflict.
The possibility of Saudi Arabia phasing out its 1 million barrel per day unilateral production cut as part of a broader agreement is now in question.
As tensions rise and fuel prices spike, Japan, the world’s fourth-largest crude buyer, has called on oil-producing nations to boost supplies to stabilize the global oil market, recognizing the potential impact on the global economy.
Meanwhile, the Energy Information Administration reported drops in U.S. crude oil and fuel inventories, driven by increased demand for diesel and heating oil, further contributing to the evolving oil market landscape.