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Global Oil Market Dynamics Shift as Israel Embargo Concerns Wane, Venezuela Sanctions Ease

  • Posted on October 19, 2023
  • News
  • By Arijit Dutta
  • 275 Views

Oil prices witnessed a decline on Thursday, reversing the previous session's gains. This was primarily due to the fact that OPEC showed no inclination to support Iran's call for an oil embargo on Israel. Simultaneously, the United States announced plans to ease sanctions on Venezuela, thus allowing more oil to enter the global market.


Global Oil Market Dynamics Shift as Israel Embargo Concerns Wane, Venezuela Sanctions Ease Image Source -www.investingnews.com

Oil prices witnessed a decline on Thursday, reversing the previous session's gains. This was primarily due to the fact that OPEC showed no inclination to support Iran's call for an oil embargo on Israel. Simultaneously, the United States announced plans to ease sanctions on Venezuela, thus allowing more oil to enter the global market.

Brent futures for December saw a decrease of 74 cents, reaching $90.76 per barrel, while US West Texas Intermediate (WTI) futures for November, expiring on Friday, dropped by 57 cents to trade at $87.75 per barrel. The more active December WTI was down by 51 cents, settling at $86.76 per barrel at 0047 GMT.

In the previous session, oil prices had climbed by about 2%. This surge was fueled by concerns about potential disruptions to global supplies following Iran's call for an oil embargo on Israel amid the conflict in Gaza. Additionally, the United States, the world's largest oil consumer, reported a larger-than-expected inventory draw, further tightening the already limited supplies.

According to sources, the Organization of the Petroleum Exporting Countries (OPEC) has no immediate plans to act on Iran's appeal. This has alleviated concerns regarding possible disruptions in oil flow.

While OPEC is not actively considering an oil boycott on Israel, experts believe that oil will play a significant role in the ongoing conflict. RBC Capital Markets expressed this sentiment in a note.

Israel primarily imports around 250,000 barrels per day (bpd) of oil, mainly from Kazakhstan, Azerbaijan, Iraq, and various African countries. Analysts at Citi suggested that an embargo from Kazakhstan and Azerbaijan, strong Israeli allies, is unlikely.

The United States issued a six-month license authorizing transactions in Venezuela's energy sector. This move comes after an agreement was reached between the Venezuelan government and the country's political opposition to ensure fair elections in 2024.

The easing of sanctions on Venezuela could potentially help stabilize global oil prices, which have been affected by the Israel-Hamas conflict, sanctions on Russia, and OPEC+ decisions to reduce output. However, Venezuela will require investments to boost its output, especially after years of sanctions.

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Recent data from the Energy Information Administration revealed that U.S. crude oil and fuel inventories decreased last week due to rising demand for diesel and heating oil. Distillate fuel stockpiles fell by 3.2 million barrels, while crude inventories fell by 4.5 million barrels, and gasoline fell by 2.4 million barrels.

Furthermore, it's anticipated that Russia's oil exports through its western seaports in November could decrease by approximately 300,000 bpd as domestic refineries are expected to increase runs following the end of seasonal maintenance.

In conclusion, the global oil market is experiencing a shift in dynamics as concerns over an Israel embargo recede and Venezuela sanctions are eased, impacting oil prices and supply levels.

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Arijit Dutta

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