A deepening economic crisis in Venezuela and the approaching deadline for President Trump’s decision on the Iran nuclear deal combined to push West Texas Intermediate above US$70 for the first time in years.
At the time of writing, the U.S. benchmark traded at US$70.45 a barrel, up by 1.05 percent from Friday’s close, with Brent crude at US$75.69 a barrel, up by 1.10 percent.
President Trump is due to announce his decision on the Iran nuclear deal by this Saturday with the majority of observers expecting him to pull out of the deal and reimpose sanctions on Tehran. This would push oil prices higher, however, which Trump doesn’t want, if we are to judge by a recent tweet, in which the President scolded OPEC for manipulating prices higher.
At the same time, Venezuelan oil production has shrunk to 1.5 million bpd from twice that about 20 years ago as it lacks the financial means to maintain fields. Also, one of the companies that have sued the country for its forced nationalization of the oil industry, Conoco, last week obtained court attachment for PDVSA storage, processing, and blending facilities in the Caribbean. If Conoco assumes control over these facilities, it would further hurt Venezuela’s oil revenues. Related: Canada Oil Revenues Fall Despite Production Growth
Meanwhile, bullish bets on WTI fell to their lowest since January last week for the second week in a row. That’s despite upbeat bank forecasts about oil prices and escalating geopolitical tensions, especially after Israel’s Prime Minister revealed an alleged mountain of evidence that Iran had cheated on the nuclear deal two weeks ago.
Speculators, however, are wary of the possibility that these tensions have been already factored into prices, and fear that the return of U.S. sanctions against Tehran will not have a significant effect on prices. Alternatively, they may be exiting their long positions on WTI on the slim chance that Trump will not renew the sanctions, which will likely lead to a price slump.
By Irina Slav for Oilprice.com
More Top Reads From Oilprice.com:
- The Next Big Trend In Offshore Oil & Gas
- Is This The End Of Diesel Trucks?
- Never Trust A Banker About Oil Prices