Oil prices experienced a decline on Thursday, reversing the gains made in the previous session. This drop was attributed to several factors, including OPEC’s lack of support for Iran’s call for an oil embargo on Israel and the United States’ intention to ease sanctions on Venezuela, which would result in increased oil supply globally.
The price of Brent futures for December fell by 0.3%, or 29 cents, to reach $91.21 per barrel. Meanwhile, U.S. West Texas Intermediate (WTI) futures for November, set to expire on Friday, remained nearly unchanged at $88.34 per barrel, with only a 2-cent increase from its previous settlement price. The more actively traded December WTI contract also saw a 0.2% decrease, or 13 cents, bringing it to $87.14 per barrel as of 0645 GMT.
The previous session had seen oil prices rise by about 2%, driven by concerns of potential disruptions in global oil supplies. This was partly due to Iran’s call for an oil embargo on Israel in response to the conflict in Gaza. Additionally, the United States, as the world’s largest oil consumer, reported a larger-than-expected reduction in oil inventories, further tightening the supply.
However, the Organization of the Petroleum Exporting Countries (OPEC) indicated that it had no immediate plans to act on Iran’s request, which eased concerns about possible supply disruptions. It’s worth noting that Israel imports around 250,000 barrels per day of oil, primarily from Kazakhstan, Azerbaijan, Iraq, and African countries.
Analysts from Citi suggested that an embargo from Kazakhstan and Azerbaijan, both strong allies of Israel, is unlikely.
Furthermore, there was a market pullback as U.S. President Joe Biden’s visit to Israel concluded without any significant escalation in the Israel-Hamas conflict, as observed by CMC Markets analyst Tina Teng. However, geopolitical tensions continue to exert upward pressure on oil prices.
On the other hand, the announcement that the U.S. issued a six-month license authorizing transactions in Venezuela’s energy sector had an impact. Venezuela, an OPEC member, reached a deal between its government and the political opposition to ensure fair elections in 2024. This move could potentially increase Venezuela’s oil production, helping to alleviate the current strain on global oil prices, caused by the Israel-Hamas conflict, sanctions on Russia, and OPEC+ decisions to reduce output. It’s worth noting that Venezuela requires investments to boost output following years of sanctions.
In addition, Japan, the fourth-largest crude oil buyer globally, urged oil-producing nations, including Saudi Arabia, to increase supplies in order to stabilize the global oil market. Rising fuel prices due to the conflict could have implications for the global economy.
The Energy Information Administration’s data showed that U.S. crude oil and fuel inventories decreased last week due to rising demand for diesel and heating oil. Distillate fuel stockpiles fell by 3.2 million barrels in the week ending October 13, reaching 113.8 million barrels. Crude inventories also fell by 4.5 million barrels, down to 419.7 million barrels, and gasoline decreased by 2.4 million barrels, reaching 223.3 million barrels.
Additionally, there are expectations that Russia’s oil exports via its western sea ports in November could decrease by approximately 300,000 barrels per day, as domestic refineries are anticipated to increase their runs following the conclusion of seasonal maintenance, according to sources cited by Reuters.