(RTTNews) – Crude oil edged higher on Friday despite oversupply concerns pulling it downward as geopolitical tension due to the Russia-Ukraine war and the U.S.-Venezuela standoff persisting with no sign of resolution.
WTI Crude Oil for January delivery was last seen trading up by $0.35 (or 0.59%) at $60.02 per barrel.
An end to the four-year-plus Russia-Ukraine war could result in the lifting of sanctions by the U.S. and the West on Russian oil exports and thereby permit the free flow of Russian oil into the markets, eventually bringing down oil prices.
Serious efforts employed by the U.S. to end the conflict triggered expectations that oil prices may soon drop.
However, U.S. mediation in ending the Russia-Ukraine war failed to reach the next level, with Russia adamant over its demand to retain the regions it captured in Ukraine and Ukraine protesting against ceding any territory.
On Tuesday, U.S. envoy to Russia Steven Witkoff talked with Russian President Vladimir Putin about the peace plan initiated by U.S. President Donald Trump. However, the discussion ended with no breakthrough.
Ukraine-friendly nations in Europe complicated the situation by warning Ukraine that the U.S. may betray Ukraine’s national interests.
Putin counter-claimed that some European leaders are united to sabotage the peace process. He even threatened that if Ukrainian troops do not withdraw from the eastern Donbas region, Russia will seize it by force.
The U.S. team is meeting Ukrainian negotiators to hear their demands and plan for the next stage.
Today, Russia stated that they are waiting for a response from the White House or Donald Trump following Tuesday’s discussions.
In the southern Caribbean region, the U.S. is continuing its military build-up apparently for striking Venezuela.
Accusing Venezuela of promoting narco-trafficking and illegal human-trafficking that transits the borders to enter the U.S., Trump’s administration is seeking ways to replace the current regime.
Venezuelan President Nicolas Maduro refuted the claims, however, countering that the U.S. wants to seize the rich oil reserves in their country under false pretexts.
Venezuela is pumping around 1.1 million barrels per day at present. Though this is a small proportion in terms of global flow, around 67% of the output is “heavy crude” for which China is the major purchaser.
In case of a U.S. military incursion, China would likely join hands with Venezuela.
As this crisis could erupt into a full-blown war, risk premium on crude oil has increased.
Oversupply concerns were precipitated after recent data from the U.S. Energy Information Administration showed that for the week ending November 28, crude oil inventories increased by 0.57 million barrels. This data is a key indicator of the supply-demand balance in the oil trade.
An increase in inventories suggests that supply is outpacing demand which is exerting downward pressure on oil prices.
Focus is now on next week’s U.S. Federal Reserve meeting, where an interest rate cut is imminent based on the recent U.S. jobs and inflation data.
A rate cut could weigh down on the greenback and consequently hit oil prices as oil is traded in the U.S. dollar.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
