OIL prices rose more than 2 per cent on Thursday (Feb 27) as supply concerns resurfaced after US President Donald Trump revoked a licence granted to US oil major Chevron to operate in Venezuela.
Investors were still keeping an eye on signs of a potential peace deal in Ukraine, which could result in higher Russian oil flows.
Brent crude oil futures settled up US$1.51, or 2.1 per cent, at US$74.04 a barrel. US West Texas Intermediate crude oil futures rose US$1.73, or 2.5 per cent, to US$70.35.
The contracts had settled in the previous session at their lowest levels since Dec 10.
“Markets like clarity as opposed to uncertainty. Unless a clear path is presented on tariffs and Eastern European peace, oil prices will remain on the defensive with sporadic and spontaneous headline-based rallies,” said Tamas Varga, an analyst at PVM.
The Chevron licence revocation means the company will no longer be able to export Venezuelan crude. And if Venezuelan state oil company PDVSA exports oil previously exported by Chevron, US refineries would be unable to buy it because of American sanctions.
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The move also could lead to the negotiation of a fresh agreement between the US producer and state company PDVSA to export crude to destinations other than the US, sources close to the talks told Reuters.
Chevron exports about 240,000 barrels per day (bpd) of crude from its Venezuela operations, more than a quarter of the country’s entire oil output.
“Chevron’s exit could reduce Venezuela (oil) production, giving Opec+ capacity to increase output. If this occurs, coastal US refiners could incur higher procurement costs,” TD Cowen analysts said in a note.
If Opec+ does not increase supply, it could increase heavy sour prices, which would hit US refiners, the analysts said. Oil prices rose during intraday trading after Reuters reported that Opec+ is debating whether to raise oil output in April as planned or freeze it as its members struggle to read the global supply picture because of fresh US sanctions on Venezuela, Iran and Russia, eight Opec+ sources said.
“It is my opinion that with Brent crude oil still hovering around US$75 per barrel, Opec+ will delay the restoration of the voluntary production cuts at least through the end of April and possibly through the end of the second quarter,” said Andrew Lipow, president of Lipow Oil Associates.
Also in focus is Trump’s involvement in efforts to facilitate a Russia-Ukraine peace deal. Trump said Ukrainian President Volodymyr Zelensky would visit Washington on Friday to sign an agreement on rare earth minerals, though the Ukrainian leader said the success of talks would hinge on continued US aid.
US economic growth slowed in the fourth quarter, the government confirmed on Thursday, and the loss of momentum appears to have persisted early this quarter amid cold weather and concerns that tariffs will hurt spending through higher prices. Meanwhile, the number of Americans filing new applications for unemployment benefits increased more than expected last week.
A separate unemployment programme, reported with a one-week lag, showed no impact yet of the recent mass layoffs of probationary federal government workers. REUTERS
