Sharp decline in oil prices

Oil fell sharply amid a series of conflicting signals, from rising inventories to tensions in the Middle East and the reimposition of U.S. sanctions on Venezuelan crude. Global benchmark Brent crude traded above $87 a barrel after falling 3 percent on Wednesday, while U.S. crude was near $83. U.S. crude inventories rose by 2.7 million barrels last week to their highest since June, while fuel demand indicators also fell. Weak U.S. data overshadowed the impact of geopolitical tensions in the Middle East as investors awaited Israel’s response to the Iranian offensive. Goldman Sachs said a premium of between $5 and $10 a barrel was currently being built up, but prices could fall if there were no increases. U.S. sanctions were also on the agenda. President Joe Biden’s administration reimposed restrictions on Venezuelan oil, ending a six-month moratorium in a move that could have choked off flows from the South American country. At the same time, new sanctions on Iranian oil are included as part of a foreign aid package to be voted on by House Republicans later this week. Oil prices have been comfortably higher since the beginning of the year, with supply cuts by OPEC+ members and geopolitical risks in the Middle East and Russia combining to help prices. The rally fueled speculation that crude could regain $100 a barrel, but the gains have now stalled as some market metrics, including timeframes, suggest conditions are getting a little less tight.