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Oil mixed as Venezuela sanctions ease, Middle East in focus

by Jessica Weisman-Pitts
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2023 10 19T005904Z 1 LYNXMPEJ9I00N RTROPTP 4 GLOBAL OIL

Oil mixed as Venezuela sanctions ease, Middle East in focus

By Laura Sanicola

(Reuters) -Oil prices were little changed on Thursday as the United States eased sanctions on Venezuela to allow more oil to flow globally, but traders remained nervous that Israel’s military campaign in Gaza could escalate to a regional conflict.

Brent futures for December were down 20, or 0.2%, to $91.30 a barrel at 11:27 a.m. EDT (1627 GMT). U.S. West Texas Intermediate (WTI) futures for November, which expire on Friday, stood unchanged at $88.32 per barrel. At their session lows, both benchmarks were down more than $1 a barrel.

The more active December WTI contract rose 0.2%, or 18 cents, to $87.45 a barrel.

Egyptian aid trucks moved closer to the only crossing into Gaza not controlled by Israel, but despite a request from U.S. President Joe Biden to allow the aid, it still had not passed through by Thursday.

“We are still very much in flux and the potential to escalate, particularly from the Arab world, is an issue,” said John Kilduff, partner at Again Capital LLC in New York.

The United States issued a six-month licence authorising 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.

The easing of U.S. oil sanctions on Venezuela is unlikely to require any policy changes by the OPEC+ producer group for the time being as a recovery in production is likely to be gradual, OPEC+ sources told Reuters.

Oil prices climbed about 2% 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.

“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 normalising 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 stabilise 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.

(Additional reporting by Katya Golubkova in Tokyo and Emily ChowEditing by Mark Potter, Kirsten Donovan and David Gregorio)