Yahoo Finance Oil Price Fundamental Daily Forecast – Sanctions on Venezuela Could Further Tighten Supply
Crude oil futures surged on Monday, hitting a 3.5 year high on geopolitical concerns over Iran and Venezuela that could lead to supply disruptions. The market rallied despite early session weakness attributed to the news that a trade war between the United States and China was declared “on hold.”
July West Texas Intermediate crude oil futures settled at $72.35, up $0.98 or +1.35% and July Brent crude oil finished at $79.22, up $0.71 or +0.90%.
Concerns over Iran were fueled as U.S. Secretary of State Mike Pompeo’s remarks on Iran strategy showed that the United States was after regime change in the Islamic Republic, a senior Iranian official told Reuters on Monday.
Venezuela’s socialist President Nicholas Maduro faced widespread international condemnation on Monday after his re-election in a weekend vote his critics denounced as a farce cementing autocracy in the crisis-stricken oil producer.
The United States is actively considering oil sanctions on OPEC member Venezuela, where output has dropped by a third in two years to its lowest in decades.
Forecast
U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher early Monday. The main catalyst driving today’s early price action is concern that Venezuela’s crude output could drop further following a disputed presidential election in the country and with potential sanctions on the OPEC-member.
At 0705 GMT, July WTI crude oil is trading $72.62, up $0.27 or +0.37% and July Brent is at $79.55, up $0.33 or +0.44%.
The U.S. is seriously considering oil sanctions on Venezuela where output has dropped by a third in two years to its lowest in decades. Sanctions at this time will severely cripple Venezuela’s ability to export while making it virtually impossible for the country to acquire dollars.
Traders also seem to be responding positively to the avoidance of a trade war between the United States and China.
Additionally, concerns over looming U.S. sanctions on Iran and the possibility of supply disruptions have also been supportive for crude oil. Supply is very tight at this time and any signs of supply disruption could send prices sharply higher.
We’re in a supply-driven market right now but there still are concerns over rising U.S. production. Because of this, today’s late session American Petroleum Institute weekly inventories report should be a market-moving event.
This article was originally posted on FX Empire
