In early trading on Friday, oil prices dropped and were poised to close lower in a second consecutive week, as increased chances of a Russia-Ukraine peace agreement counterbalanced the threat of supply disruptions due to a blockade of Venezuelan oil tankers.
Brent crude futures were down 9 cents, or 0.2 percent, to $59.73 a barrel by 0111 GMT, and U.S. West Texas Intermediate crude was trading 16 cents, or 0.3 percent lower, at $55.99 a barrel. Both benchmarks fell by over 2 percent weekly.
U.S. President Donald Trump said on Thursday that he thought negotiations to end the war in Ukraine are “getting close to something” before a U.S. meeting with Russians over the weekend.
In the other possible geopolitical trigger, it was not immediately evident how the U.S. would implement the announcement of Trump to blockade on tankers under sanctions that come in and out of Venezuela, which constitutes about 1 percent of world supplies.
Recently, the U.S. Coast Guard has taken a historic step by seizing a Venezuelan oil tanker last week. IG analyst Tony Sycamore said on Friday that “Uncertainty over enforcement details and optimism that a potential U.S.-led Ukraine peace deal could still emerge (are) easing global supply concerns and tempering geopolitical risk premiums.”
Additional actions against Russian oil would comprise an even bigger threat to supply the market than Trump blockading tankers in Venezuela, analysts believe.
The two sources familiar with Venezuela’s oil export operations reported that Venezuela on Thursday authorized two unsanctioned very large crude carriers to sail to China. Analysts at Bank of America indicated that the lower price of oil will reduce the amount of supply, which could avoid a free drop in prices.
IG’s Sycamore said that “A rally from current levels that breaks above resistance at $56.70-$56.90ish would strengthen the case that this week’s selloff to the $54.98 low was a false break lower.”
He further added that “Conversely, a break below $54.98/90ish would reignite downside momentum, targeting the psychological $50.00 level.”
