By Barani Krishnan
Investing.com - Venezuela,the almost-forgotten name in U.S. sanctions returned to the fore of the oil market on Tuesday as the Trump administration ratcheted up action against the South American country in a move that only briefly lifted crude prices.
New York-traded West Texas Intermediate crude settled down $1.06, or 1.9%, at $53.63 per barrel. It rose as much as 73 cents earlier.
London-traded Brent crude, the benchmark for oil outside of the U.S., remained under the key $60 per barrel support. By 2:55 PM ET, it was down 68 cents, or 1.1%, at $59.13. It gained 74 cents earlier.
U.S. President Donald Trump signed an executive order late Monday to declare a total economic embargo against Venezuela, freezing all of the government’s assets and prohibiting transactions with the country, unless specifically exempted.
Trump wrote to Congress that the decision is designed to put further strain on Venezuela “in light of the continued usurpation of power by the illegitimate Nicolás Maduro regime”.
The U.S. announced in January its recognition of Juan Guaidó, head of Venezuela’s national assembly, as the country’s legitimate leader. Although more than 50 countries worldwide followed suit, major players such as Russia and China still back Maduro.
International sanctions have increased the strain on Venezuela, whose economic crisis has seen the country’s oil production last year nearly cut in half.
But while the Trump administration has applied almost even sanctions pressure on both Venezuela and Iran, the standoff with Tehran has had a bigger impact on the market given the Islamic Republic’s role as a greater oil producer within OPEC. Recent upheaval caused to crude shipments in the Strait of Hormuz by Iran’s Revolutionary Guard Corps has also provided a floor to oil prices amid worries about declining global demand for crude.
In Tuesday’s session, WTI and Brent had only a brief reprieve on the Venezuelan factor, before sliding again on the U.S.-China trade war.
Since the week began, WTI has lost 3.4% and Brent 4.4% as China devalued its currency in response to Trump’s plans to impose from Sept. 1 a 10% tariff on hitherto untaxed Chinese imports of $300 billion. The Xi Jinping administration also ordered state-owned companies to suspend imports of U.S. agricultural products. But the Chinese currency rebounded today, helping equity markets from yesterday's sharp selloff.
Despite the weak sentiment, the downside in oil was limited somewhat by expectations that data on Wednesday would show an eighth-consecutive week of declines in U.S. crude stockpiles.
Industry group the American Petroleum Institute is due to release at 4:30 PM ET (20:30 GMT) a snapshot on what U.S. Energy Information Administration would likely say about oil inventories for the week ended Aug 2. Crude stockpiles have fallen for seven past weeks in a row, draining nearly 50 million barrels from holdings. Analysts now forecast a drawdown of around 2.8 million barrels for last week.
Elsewhere Tuesday, Gulf Intelligence’s latest monthly survey showed two-third of respondents expect the extension of the OPEC+ deal on output restraint to push Brent crude prices to $70 a barrel, other things being equal.