Crude extended loses as Venezuelan supply adds to already ample market

Crude prices fell for a second straight session as markets assessed the supply impact of a new agreement allowing the US to import up to $2 billion worth of Venezuelan crude, a move expected to add barrels to the world’s largest oil consumer and reinforce expectations of ample global supply.

Brent crude settled down 74 cents, or 1.2%, at $59.96 a barrel, while West Texas Intermediate declined $1.14, or 2%, to $55.99 a barrel. Both benchmarks had already dropped more than $1 a barrel in the previous session, as traders positioned for a well-supplied market this year.

Under the deal between Washington and Caracas, cargoes originally destined for China may be redirected, potentially reshaping near term trade flows. US officials said Venezuela would hand over 30-50 million barrels of sanctioned crude as part of the arrangement. Adding to supply concerns, US forces also seized two additional sanctioned tankers and said some of the cargoes were already being marketed.

Oil prices have remained under pressure since the start of the year, extending last year’s steepest annual decline since 2020. With global output running ahead of demand growth, analysts see further downside risks if supply additions persist.

Some support emerged from US inventory data. The Energy Information Administration reported that crude stockpiles fell by 3.8 million barrels to 419.1 million barrels in the week ended 2 January, defying marketexpectations for a 447,000 barrel build.

However, the bullish signal was tempered by a sharp rise in refined product stocks. US gasoline inventories increased by 7.7 million barrels during the week, well above market forecasts for a 3.2 million barrel build, highlighting soft seasonal demand dynamics despite steady consumer fuel consumption.

Written by: Farid Muzaffar