Crude oil prices continued their upward trajectory, with the market focused on threatening rhetoric from U.S. President Donald Trump aimed at Iran, alongside his administration's efforts to gain control over Venezuela's crude exports and energy sector. Following a 3.2% rise on Thursday, WTI prices surpassed $58 per barrel, while Brent crude hovered near $62 per barrel. Trump threatened that the U.S. would take "hard" measures against Iran if its government used force to quell protests during the current period of unrest. Citigroup pointed out that the annual rebalancing cycle for commodity indices is expected to funnel funds back into the crude oil market, further fueling the price rally. Simultaneously, Trump expressed his support for a bipartisan Russia sanctions bill. This legislation, designed to sanction buyers of Russian crude oil, could be submitted to Congress for a legislative vote as early as next week.
After logging their largest single-day gain since October on Thursday, crude oil futures are now on track for a weekly increase; however, the market anticipates that a significant supply glut this year will exert downward pressure on prices in the coming months. Goldman Sachs Group noted that its clients' bearish sentiment towards the oil market has reached its highest level in a decade. Robert Rennie, Head of Commodity Research at Westpac Banking Corp, stated, "The crude oil market remains caught in a complex interplay between heightened geopolitical risks and rising inventories." He added that with increasing crude supplies from Venezuela, coupled with sustained production growth from other regions, prices could be confined to a range in the $50s per barrel during the first quarter. Investors are still assessing the implications of U.S. actions targeting Venezuela following the arrest of its President, Nicolás Maduro. Nearly 20 oil industry executives, including representatives from Exxon Mobil Corp and Chevron Corp, along with veteran independent oil explorer Harold Hamm, are scheduled to meet with Trump and senior U.S. officials at the White House on Friday to discuss rebuilding Venezuela's energy sector.
Chevron, currently the only major U.S. oil company authorized by the U.S. government to operate in Venezuela, is loading Venezuelan crude onto tankers at the fastest pace in seven months. These crude shipments are primarily destined for U.S. refiner Phillips 66. Two major commodity traders, Trafigura Group and Vitol Group, are in discussions with U.S. refiners to gauge their interest in purchasing Venezuelan crude; both companies have already received preliminary licenses for crude sales from the U.S. Treasury Department. The measures implemented by the Trump administration could redirect more Venezuelan crude flows to U.S. refiners, potentially leading to a corresponding decrease in China's crude imports. Previously, due to the impact of U.S. sanctions, Venezuelan crude traded at a significant discount, making Chinese refiners its largest buyers. However, some Chinese refiners are now actively seeking alternative supply sources, including more expensive Canadian crude.
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