Oil Prices Recover Following Chevron’s License Revocation in Venezuela

On Thursday, oil prices saw an uptick as U.S. President Donald Trump retracted a critical authorization that previously allowed Chevron to continue its operations in Venezuela. This strategic decision has the potential to constrain global oil supplies.

By 0154 GMT, Brent crude futures experienced a rise of $0.19 (0.3%), reaching $72.72 per barrel. U.S. West Texas Intermediate (WTI) crude also saw a marginal increase of $0.16 (0.2%), climbing to $68.78 per barrel.

The previous day, both crude benchmarks had settled at their lowest since December 10, pressured by an unexpected increase in U.S. fuel inventories, which indicated declining demand. Additionally, there was increased optimism regarding possible peace negotiations between Russia and Ukraine.

Chevron Operations Affected by Presidential Decision

In his announcement on Wednesday, Trump stated he was withdrawing a license originally granted by former President Joe Biden, which allowed Chevron to conduct business in Venezuela. This action disrupts Chevron’s ability to export 240,000 barrels per day, accounting for over 25% of Venezuela’s oil production, thereby potentially tightening global supply chains.

According to Hiroyuki Kikukawa, president of NS Trading, a division of Nissan Securities, the news from Venezuela spurred some reversal of recent downward trading trends, especially amidst ongoing ceasefire discussions between Russia and Ukraine.

Influence of Strategic Petroleum Reserves and Market Dynamics

The possibility of the U.S. purchasing oil for its Strategic Petroleum Reserve (SPR) also helped stabilize prices. Trump had previously committed to replenishing the reserves swiftly, critiquing Biden’s earlier decision to utilize the SPR to mitigate gasoline prices.

Geopolitical Developments and Market Expectations

The market is closely watching Trump’s diplomatic efforts related to the Russia-Ukraine conflict. The U.S. president announced that Ukrainian President Volodymyr Zelenskiy is set to visit Washington on Friday to finalize a rare earth minerals agreement. Zelenskiy highlighted that the agreement’s success is heavily reliant on continued U.S. support.

U.S. Inventory Trends and Future Outlook

While U.S. crude inventories saw an unexpected decrease last week, stockpiles of gasoline and distillates rose, reflecting the usual seasonal demands. Kikukawa remarked that the decline related to the rise in fuel inventories appears to have stabilized as demand shifts from kerosene to gasoline. Goldman Sachs maintained its baseline Brent crude price range of $70-85, pointing to the U.S. administration’s priorities on commodity control and price affordability as significant market influences.