Oil Drops for Fourth Day With Venezuela Aiding Supply Outlook

(Bloomberg) -- Oil fell for a fourth day as an improving supply outlook hit a market grappling with sluggish demand in the biggest importers.

West Texas Intermediate futures traded below $79 a barrel after dropping 1.8% on Wednesday. The Biden administration is in talks with Venezuela to explore a temporary lifting of sanctions that have hindered its oil sales. That comes on top of a surge in exports from Iran this month.

A rally in crude that got underway in late June has faltered over the last couple of weeks due to a deteriorating economic situation in China and signs that US interest rates will need to stay higher for longer. That’s overshadowed a tightening market driven by Saudi Arabian and Russian supply cuts.

The curbs have helped drive a sharp slump in global oil inventories over the past month, according to data from Kpler. In the US, crude stockpiles fell by 6.1 million barrels last week to the lowest since December, the Energy Information Administration said on Wednesday.

“We see oil prices trading range-bound in the short term as the tug of war between demand fears and tighter supply continues,” said Han Zhong Liang, investment strategist at Standard Chartered Plc. WTI will likely stay around $79 a barrel for now, he said.

Timespreads are also pointing to less positivity on oil prices. WTI’s prompt spread is 30 cents a barrel in the bullish backwardation pattern, compared with 59 cents at the end of last week.

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