The price of Brent crude rose Wednesday after output from OPEC member Venezuela came into renewed doubt, enhancing worries over global supply.
Brent crude, the global benchmark, rose 0.3% to $75.62 a barrel on London’s ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures slipped 0.3% at $65.35 a barrel.
The increase in the Brent oil price followed reports late Tuesday that Venezuela state oil company PDVSA may have to declare force majeure—the legal clause that allows firms to walk away from contracts due to causes outside of their control—on some of their oil contracts.
PDVSA has indicated to eight customers that it wouldn’t be able to meet its commitment to deliver 1.5 million barrels a day in June, given that it only has 694,000 barrels a day to export, according to S&P Global Platts.
“PDVSA is struggling to load all the cargoes they owe in light of the dramatic slump in production they’ve had in the last year and the issue is only worsening there,” said Tom Pugh, commodities analyst at Capital Economics.
Adding to those geopolitical factors were data from American Petroleum Institute, an industry group, which said late Tuesday that its own data for the week showed a 2-million-barrel decrease in crude supplies, a 3.8-million-barrel rise in gasoline stocks and an 871,000-barrel fall in distillate inventories, according to a market participant.
Despite the uptick on Wednesday, Brent has pressure in recent days, having dropped 2.5% over the past week after Saudi Arabia, the de facto leader of the Organization of the Petroleum Exporting Countries, signaled a willingness to relax the output caps that helped rebalance the oil market.
OPEC and external producers, including Russia, have been involved in a two-year effort to remove almost 2% of the global crude supply in a bid to prop up prices.
Many market observers are anticipating a drop in crude prices ahead of the cartel’s next meeting in Vienna on June 22.
Adding to those expectations was a Bloomberg report on Tuesday that said the U.S. government had quietly asked Saudi Arabia and some other OPEC producers to increase oil production by about 1 million barrels a day, offsetting a sharper-than-expected production drop from cartel constituents like Venezuela.
Investors “have been anticipating an increase in production in response to geopolitical tensions and that’s what has caused that retracement,” said Geordie Wilkes, an analyst at Sucden Financial Research. Aside from Venezuela, OPEC members were also keeping an eye on volatile production in Nigeria and Iran, Mr. Wilkes said.
Investors were looking ahead to the U.S. Energy Information Administration’s closely watched weekly inventory report, scheduled to be released Wednesday, for the latest figures on U.S. production and consumption.
Estimates from 11 analysts and traders surveyed by The Wall Street Journal showed U.S. oil inventories are expected to have decreased by 1.9 million barrels, on average, during the week ended June 1.
The EIA’s reported inventories of “total stocks” of crude oil and fuels have risen bearishly for two straight weeks to their highest level since early March as infrastructure bottlenecks trapping shale oil have depressed prices in the U.S.
Nymex reformulated gasoline blendstock — the benchmark gasoline contract—fell 0.76% to $2.11 a gallon. ICE gas oil changed hands at $659.75 a metric ton, up 0.8%.
