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Oil falls 2% on Powell comments, hopes for Venezuela supply

Commodities May 17, 2022 05:36PM ET
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© Reuters. FILE PHOTO: Oil pump jacks are seen at the Vaca Muerta shale oil and gas deposit in the Patagonian province of Neuquen, Argentina, January 21, 2019. REUTERS/Agustin Marcarian

By Stephanie Kelly

NEW YORK (Reuters) -After hitting seven-week highs, oil prices slumped 2% on Tuesday as Reuters reported that the United States could ease some restrictions on Venezuela's government, raising hopes that the market could see some additional supplies.

Prices also fell after Federal Reserve Chairman Jerome Powell warned the economy could be hurt by attempts to reduce inflation.

For the first time since May 2020, the Brent international benchmark settled below U.S. West Texas Intermediate crude. Refiners worldwide have scrambled to find alternative energy supplies after Russia's invasion of Ukraine. U.S. reserves are falling and that has raised the price for U.S.-based crudes, said Andrew Lipow, president of Lipow Oil Associates in Houston.

Brent crude fell $2.31, or 2%, to settle at $111.93 a barrel, and U.S. West Texas Intermediate (WTI) crude fell $1.8, or 1.6%, to settle at $112.40 a barrel.

Powell suggested there could be some economic pain involved in bringing inflation down. The U.S. central bank will "keep pushing" to tighten U.S. monetary policy until it is clear that inflation is declining, he said.

"Some of those comments tempered buying enthusiasm on the oil side," said Phil Flynn, an analyst at Price Futures Group.

U.S. President Joe Biden's administration will authorize U.S. oil company Chevron Corp (NYSE:CVX) to negotiate with Venezuelan President Nicolas Maduro's government as soon as Tuesday, Reuters reported, citing sources. There is no final U.S. decision yet on renewing Chevron's current limited license to operate in Venezuela, the source said.

Oil prices have generally been rising as Russian supply is squeezed by bans from several countries and an economic downturn due to broad sanctions on Moscow imposed by the United States and allies.

Russia's production dropped by 9% in April, and the country, part of the OPEC+ group, produced far below levels required under a deal to gradually ease record output cuts made during the worst of the pandemic in 2020.

This month, non-Russian deliveries into the Polish port of Gdansk hit the highest in at least seven years, as refiners in eastern Germany and Poland switched.

"Ultimately, this is a supply-side story," said Fawad Razaqzada, analyst at City Index. "Unless OPEC and its allies ramp up production and fast, it is difficult to see how prices can go down meaningfully."

EU foreign ministers failed on Monday in their effort to pressure Hungary to lift its veto on the proposed oil embargo. But some diplomats now point to a May 30-31 summit as the moment for agreement on a phased ban on Russian oil.

U.S. crude and gasoline stocks fell last week, according to market sources citing American Petroleum Institute figures on Tuesday. U.S. government data is due on Wednesday. [API/S] [EIA/S]

Oil falls 2% on Powell comments, hopes for Venezuela supply
 

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Comments (3)
trevor hron
trevor hron May 17, 2022 4:39PM ET
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With limited Capex over the last 4 years we’re going to be way behind on R&D and exploring. There has also been a major slow down in infrastructure. It’s going to take a lot of time and 💴💴💴 to get things rolling. Especially if we have to make up for the majority of supply shortage. Supply side will only get worse over the coming months. Biden will have drained our SPR to dangerous low levels. Equating to roughly 25 days of supply and it will be under 20 days supply after the massive 180 million draw down President Biden decided to go with. Plus cutting the legs off of our domestic E&P’s along with several other sectors in the energy mix including midstream and upstream companies doing the refining.
Kaushal Shah
Kaushal Shah May 17, 2022 12:18AM ET
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today will c big big fall enjoy🤣🤣🤣
Emil Miclea
Emil Miclea May 17, 2022 12:18AM ET
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Okay dude your not making any sense
raouf chaabini
raouf chaabini May 17, 2022 12:18AM ET
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To Mr. SHAH  ;  Excellent call .  At 10:03 AM ET, I made a post saying that  WTI  will drop today to  111.60 or lower.  My post was DELETED  just  13 seconds later.  I  went  SHORT @  115.41.
trevor hron
trevor hron May 17, 2022 12:18AM ET
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It’s going to take significant price increases in order to make up for the higher demand and depletion of supply. With most major oil production avenues taking several months to add any meaningful production increases. With the majority being 6-12 months before they can be brought online and getting it to oil to refineries and exports.
Tom Car
Tom Car May 16, 2022 9:20PM ET
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I guess government will burn our oil reserves after they banned production
Tre Hsi
Tre Hsi May 16, 2022 9:20PM ET
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which govt is banning production?  or is this just another random rant?
First Last
First Last May 16, 2022 9:20PM ET
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U.S. production at highest since Trump lost election.
Ac Tektrader
Ac Tektrader May 16, 2022 9:20PM ET
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tom ....you need to check your facts before you issue your rant....
 
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