- Crude oil prices struggle as potential Venezuelan oil could increase global supply further.
- US stock inventories’ drawdown limits the losses in crude oil for the time being.
- Markets await Friday’s US NFP data for fresh impetus.
Crude oil struggles near the $56.00 level during the earlier European session after several days of losses. Prices remain under pressure amid renewed supply concerns following President Trump’s comments about Venezuela’s oil flows. This keeps traders cautious despite slightly supportive fundamentals.
President Trump mentioned that Venezuelan authorities agreed to supply 30-50 million barrels of sanctioned oil to the US, in exchange for granting Washington access to the country’s oil sector. Although this volume is small compared to the global oil supply, its symbolic impact is strong enough to influence crude oil prices. Morgan Stanley and several other institutions have warned of a significant oil surplus, predicting that demand growth will slow as OPEC and non-OPEC outputs rise.
Moreover, reports indicate that Venezuelan oil currently stored or on tankers could resume movement, potentially diverting cargoes away from China to the US. Merey crude, a Venezuelan flagship, trades at a steep discount to Brent, raising concerns that cheaper production could impact higher-cost production elsewhere.
Meanwhile, the WTI losses have been contained for the time being by the sharper drawdown in the US crude inventories. According to the EIA, US crude stocks decreased by 3.8 million barrels, defying odds for a build. This shows a firm demand in the US.
Looking ahead, attention is turning to US macro data, particularly Friday’s nonfarm payrolls report. A weaker jobs outcome could pressure the US Dollar, offering mild support to oil prices. However, geopolitics remains the key driver for now. While some analysts argue that tighter US control over Venezuelan oil could keep restrictions in place and prove price-supportive, the market is currently focused on the risk of oversupply.
In the near term, WTI appears vulnerable to further downside if supply headlines continue to build, with some analysts warning of a potential move below $54. Any sustained recovery is likely to require clearer signs of demand strength or confirmation that additional Venezuelan barrels will not hit the market as quickly as feared.
