Oil prices pared their gains on Tuesday, after global benchmark Brent crude rose above $73 a barrel, as the market grew less worried that a rebellion against Venezuelan President Nicolas Maduro would hit the country’s crude exports.
Prices rose after Venezuelan opposition leader Juan Guaido called for military backing to end Maduro’s rule, but pared gains after the government said state-run oil company PDVSA’s operations were not disrupted and top military leaders remained loyal.
“The possibility that Guaido will take control of the situation isn’t as strong as perceived this morning,” said Bob Yawger, director of energy futures at Mizuho in New York. “If Maduro hangs on, you’ll see the market stay lower.”
Brent crude futures hit a session high of $73.27 per barrel and settled 76 cents, or 1.1 per cent, higher at $72.80. Last week, Brent hit a six-month high above $75.
U.S. crude futures closed at $63.91, up 41 cents, or 0.7 per cent, on the day, after hitting a session high at $64.75.
Prices pared their gains further in post-settlement trade after industry group American Petroleum Institute reported that U.S. crude inventories rose 6.8 million barrels last week, more than analysts’ forecasts for a 1.5 million-barrel build. Official government data is due on Wednesday.
OPEC member Venezuela’s oil exports have already been reduced by U.S. sanctions on PDVSA and an economic crisis, helping to curb the Organization of the Petroleum Exporting Countries’ production to a four-year low, according to a Reuters survey.
If Maduro’s government remains in power for much longer, Venezuela’s crude exports and output will continue to decline as the OPEC producer wrestles with power outages and other problems, analysts said.
“The situation appears to be getting much worse, rather than better,” said Phillip Streible, senior commodities strategist at RJO Futures in Chicago. “Their oil production is going to continue to slide.”
Earlier, crude prices drew support when Saudi Arabia Energy Minister Khalid al-Falih said a deal between producers to cut output could be extended to the end of 2019. U.S. President Donald Trump has pressured OPEC to raise output as Washington has tightened sanctions against Iran.
OPEC and other allies led by Russia have agreed to cut output by around 1.2 million bpd for six months until the end of June. The group meets in Vienna on June 25-26 to decide on next steps.
Also supporting prices was government data showing that U.S. crude production fell in February for the second month in a row, sliding 187,000 barrels per day (bpd) to 11.7 million bpd.
“That’s modestly supportive of prices,” said John Kilduff, a partner at Again Capital LLC in New York. “We saw a pullback in operations in reaction to lower prices from last year. It shows the march forward to ever-higher production isn’t limitless.”
Rising output to record levels has made the U.S. the top global oil producer, helping to boost domestic crude stocks to their highest since October 2017.