Oil prices gained on Friday as trade talk optimism offset expectations of more supply from Venezuela.
However, prices are likely to remain capped due to plentiful supply in the market, according to experts.
At the time of writing, the West Texas Intermediate crude oil on the New York Mercantile Exchange was at $66.62 per barrel, up 0.9% from the previous close. The Brent crude price on the Intercontinental Exchange was at $69.77 a barrel, also up 0.9%.
Trade deal optimism
The prospect of additional trade agreements between the United States and its partners, ahead of the August 1 deadline for new tariffs on various goods, bolstered both oil prices and stock markets.
David Morrison, senior market analyst at Trade Nation said:
This has raised hopes that the US will soon reach a deal with the European Union as well, before the tariff deadline which expires in just over a week’s time.
Following the recent trade agreement between the US and Japan, two European diplomats indicated that the European Union is progressing towards a trade deal, according to Reuters.
This prospective deal would include a base US tariff of 15% on EU imports, with the possibility of exemptions.
Venezuela oil supply
The rise in oil prices was despite reports indicating US President Donald Trump had permitted Chevron to restart operations in Venezuela.
Roughly two months ago, a significant shift occurred in the relationship between the US government and Chevron’s operations in Venezuela.
The US government ended Chevron’s ability to produce oil in the South American nation, a move that carried considerable economic and geopolitical implications.
This reversal of policy did not happen in isolation, however. It coincided directly with the release of several Americans who had been detained in Venezuela.
This alignment of events suggests a potential quid pro quo, where the curtailment of Chevron’s activities in exchange for the release of US citizens highlights the complex interplay between foreign policy, economic sanctions, and humanitarian concerns.
“This should see Venezuelan oil exports increase by a little more than 200k b/d, welcome news to US refiners that will ease some tightness in the heavier crude market,” Warren Patterson, head of commodities strategy at ING Group, said in a note.
US crude inventories fall
“Furthermore, US crude oil inventories fell last week, suggesting a robust demand in the world’s largest crude consumer, supporting the black gold,” FXStreet said in a report.
US crude oil stockpiles decreased by 3.169 million barrels in the week ending July 18, following a 3.859 million barrel decline the previous week, according to the latest weekly crude oil stock report from the US Energy Information Administration (EIA).
The market consensus estimated that stocks would decrease by 1.4 million barrels.
Crude continues its sideways trading, despite this morning’s gains.
“Oil has spent the past month consolidating in a relatively narrow range with no clear directional bias,” Trade Nation’s Morrison said.
US demand has provided some support. But supply remains plentiful, and this is helping to keep a cap on prices for now.
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