Oil slides 2% on news US to sell Venezuelan crude indefinitely [Today’s oil prices]

Global oil prices fell sharply after the United States said it would sell Venezuelan crude on the market indefinitely. Expectations that supply could increase alongside sanctions relief spread, intensifying downward pressure on prices.

On the 7th (local time), February-delivery West Texas Intermediate (WTI) futures on the New York Mercantile Exchange settled at $55.99 a barrel, down $1.14 (1.99%) from the previous session. It marked a second straight day of declines.

The White House said that day it "plans to take delivery of crude from Venezuela and sell it on the global market indefinitely." The statement effectively means the United States intends to control distribution of Venezuelan crude. It also said it is discussing with US oil companies ways to rebuild Venezuela’s oil infrastructure, and is selectively easing sanctions to allow the transport and sale of crude and petroleum products.

Concerns that Venezuelan crude could begin flowing into the market in earnest and add to global supply were immediately priced in. While it is widely assessed that fully restoring Venezuela’s oil infrastructure would require about $100 billion and more than 10 years, US President Donald Trump said that "partial normal operations are possible in a year and a half." Trump also wrote on social media the previous day that "Venezuela will hand over 30 million to 50 million barrels of sanctioned crude to the United States."

The market is also watching for the possibility that an influx of low-priced Venezuelan crude could delay production increases by major oil-producing countries. Oil-market consultancy BMI said, "If Venezuelan crude exports rise, expansion of production in multiple countries, including the United States, may be deferred."

Meanwhile, US crude inventories fell contrary to expectations, but it was not enough to lift prices. According to the Energy Information Administration (EIA), US commercial crude inventories for the week ended the 2nd fell by 3.83 million barrels. The market had expected an increase of 1.1 million barrels.

Lee Hye-in, hey@hankyung.com