Oil Price Fundamental Daily Forecast – Venezuela Supply Worries Offsetting Renewed China Demand Hopes

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower on Wednesday shortly before the release of the weekly government inventories report.

New concerns that the United States could ease some restrictions on Venezuela’s government are making longs nervous about new supply. Furthermore, this is offsetting demand hopes tied to China’s possible loosening of COVID restrictions.

At 14:05 GMT, July WTI crude oil is at $110.11, up $0.48 or +0.44%. July Brent crude oil is trading $112.15, up $0.22 or +0.20% and the United States Oil Fund ETF (USO) is at $81.51, up $0.40 or +0.49%.

Additional Supply from Venezuela?

U.S. officials and others familiar with the matter are expecting Venezuelan President Nicolas Maduro and the country’s opposition to announce a resumption of talks as Washington eases some sanctions to help smooth the way for the negotiations.

U.S. President Joe Biden’s administration authorized U.S. oil company Chevron Corp to open talks with Maduro’s government, temporarily lifting a ban on such discussions, senior administration officials said on Tuesday.

Washington has not made a final decision on renewing Chevron’s current limited license to operate in Venezuela, several sources told Reuters. Chevron is the last U.S. oil producer to maintain a presence in Venezuela, home to the world’s largest crude reserves.

Traders Shrug Off Mixed API Report

The American Petroleum Institute (API) reported a draw this week for crude oil of 2.445 million barrels, compared to analyst estimates of a 1.533 million barrel build. The draw comes even as the Department of Energy released 5 million barrels from the Strategic Petroleum Reserves the week-ending May 13.

The API also reported a draw in gasoline inventories of 5.102 million barrels for the week ending May 13. Last week, it reported an 823,000 barrel build.

Distillate stocks saw a build in inventories of 1.075 million barrels for the week ending May 13. This compares to last week’s 662,000 barrel increase.

Daily Forecast

Today’s U.S. Energy Information Administration (EIA) weekly inventories report is expected to show a 2.1 million barrel increase. However, the focus is likely to be on gasoline and distillate inventories.

Earlier in the week, U.S. gasoline prices soared to record highs. Prices could move even higher if supply remains low at the start of the U.S. summer driving season. It begins on May 31.