Crude Futures Fall as US Eases Sanctions
Crude futures experience a decline as US eases sanctions on Venezuela's oil and gas sectors, raising concerns about the Israel-Hamas conflict.
Crude futures experienced a decline on Thursday, erasing much of the strong gains from the previous session. This drop comes after the United States agreed to ease sanctions on Venezuela's oil and gas sectors. However, concerns remain regarding a potential spread of the Israel-Hamas conflict.
According to Ricardo Evangelista, a senior analyst at ActivTrades, the easing of sanctions is expected to "provide some relief to the supply-side pressures that have supported the recent price rises."
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According to Sofia Guidi Di Sante, senior oil analyst at Rystad Energy, a deal has been made that could pave the way for a medium-term increase in oil production. However, the potential expansion is hindered by the prolonged lack of investments in the industry. In a note on Tuesday, Di Sante stated that "in the short term - six months after sanctions are lifted - production could only ramp up by a maximum of 200,000 barrels per day; a relative drop in the ocean on the global stage."
Earlier, it was reported that Venezuela is facing a "long journey" to boost its oil output if the United States eases sanctions.
Meanwhile, the oil market has calmed down after experiencing a sharp gain in the previous session which led to crude oil reaching its highest level since the Oct. 7 Hamas attack on Israel. The jump on Wednesday was triggered by a blast at a Gaza hospital that prompted Iran to call for an OPEC embargo against Israel. This event also stoked fears that the Israel-Hamas war could spread, posing a threat to oil supplies. However, Reuters later reported that OPEC had no plans for an immediate response.
The stabilization of oil prices can be seen as a case of "no news is good news". According to Evangelista, the situation remains critical and continues to threaten the involvement of the Middle East in a wider conflict, which could disrupt the global supply of crude. However, so far there has been no escalation, and the nerves of oil traders seem to have calmed.