Oil prices dropped on Thursday as the lifting of sanctions on Venezuela’s oil exports eased tight supply fears, although price declines were capped by investor caution amid the escalating tension in the Middle East and data signaling a rebound in China’s economy.
International benchmark crude Brent traded at $90.88 per barrel at 10.29 a.m. local time (0729 GMT), a 0.67% loss from the closing price of $91.50 a barrel in the previous trading session on Wednesday.
The American benchmark West Texas Intermediate (WTI) traded at the same time at $86.92 per barrel, down 0.40% from Wednesday’s close of $87.27 per barrel.
Brent surged suddenly on Wednesday, climbing to $93 a barrel after Iran called for an oil embargo on Israel after an Israeli airstrike on the Al-Ahli Baptist Hospital in Gaza killed more than 500 people late Tuesday.
However, given that Israel imports approximately 270,000 barrels of oil per day, with approximately 90,000 barrels a day imported from Kazakhstan and 50,000 barrels a day arriving from Azerbaijan, experts see little influence on oil markets.
Although escalating geopolitical tensions in the Middle East as a result of Israel's actions against Palestine have put upward pressure on prices by boosting supply fears, the likelihood of Venezuelan oil returning is alleviating these concerns.
On Wednesday, the US decided to partially ease sanctions on the oil, gas and gold sectors in Venezuela following the resumption of talks between the government and the country's opposition in Barbados.
The decision by the US administration came in response to a political agreement signed between representatives of the government of Nicolas Maduro and the US-backed opposition to hold elections next year.
Market sentiment was boosted after data showed that China’s value-added industrial output, an important economic indicator, rose 4% year-on-year in the first three quarters of this year.
The National Bureau of Statistics (NBS) growth numbers indicate that the world's second-largest oil-consuming country's industrial production recovery is advancing.
Declining US stockpiles signal demand improvement
A further bullish impact on prices came with a drop in US crude oil inventories. The Energy Information Administration (EIA) on Thursday revealed a drop of 4.5 million barrels per day to 419.7 million barrels, compared to the American Petroleum Institute's expectation of a drop of around 4.4 million barrels.
Investors are now keeping tabs on Federal Reserve Chair Jerome Powell’s speech before the Economic Club of New York and ahead of the Fed’s next interest rate decision, AA reports.