Oil prices edged lower in early Asian trading on Tuesday as markets weighed the possibility of higher Venezuelan crude output, reinforcing expectations of ample global supply amid weak demand.
Brent crude futures fell around 0.34% to trade near $61.55 per barrel, while U.S. West Texas Intermediate slipped by 0.45% to $58.06 per barrel in early.
Price pressure was due to the prospect of a potential easing of U.S. sanctions on Venezuelan oil and a subsequent increase in output. In an already well-supplied global market, the fear of additional oil appears to be outweighing any concerns of a short-term supply shock.
As markets continue to digest the fallout from the U.S. capture of Maduro, members of the Trump Administration are expected to meet with U.S. oil executives this week to discuss boosting Venezuelan oil production. Venezuela, a founding member of OPEC with the world’s largest proven oil reserves, averaged roughly 1.1 million barrels per day of crude output last year, well below its historical capacity.
Venezuelan production could rise by as much as 500,000 barrels per day over the next 18 months under improved political and investment conditions, a development that could further weigh on oil prices despite the likelihood of a response from OPEC+ if inventories rise sharply.
President Trump has been very clear that the blockade of Venezuela and the capture of its president have been driven by the desire to revive Venezuela’s oil industry and regain what he alleges were stolen assets and oil. If the new acting president proves willing to work with the U.S., then the likelihood of sanctions being lifted and production climbing will increase dramatically.
By Charles Kennedy for Oilprice.com
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