Oil prices slip amid expectations of increased Venezuelan production, likely to remain volatile, say experts

Oil prices declined on Tuesday as markets assessed the possibility of increased Venezuelan crude production after the U.S. captured the Latin American country's president, Nicolás Maduro, reinforcing expectations of abundant global supply this year amid a subdued demand environment.

Brent crude futures slipped 0.2% to $61.62 per barrel by 0103 GMT, while U.S. West Texas Intermediate fell 0.3% to $58.15 per barrel.

Experts told Reuters they see lifting of the U.S. sanctions on Venezuelan oil and an increase in supply, which could weigh on prices.

According to a source cited by Reuters, the administration of U.S. President Donald Trump is set to hold talks with American oil executives this week to explore ways to ramp up oil production in Venezuela.

In the previous session, oil benchmarks closed more than 1% higher as the US-Venezuela crisis injected some geopolitical risk premium into prices.

Analysts noted that Venezuela’s crude production could rise by up to 500,000 barrels per day over the next two years, provided political stability is maintained, and U.S. investment flows into the country.

"Longer term, the U.S. administration's stated desire to drive up Venezuelan oil supply is likely to provide a net bearish impulse to the market. Importantly, we continue to think that OPEC, led by Saudi Arabia, will likely respond to any significant rise in inventories by cutting output to protect $55-60/bbl Brent over the medium term should supply surprise to the upside," global firm Citi was quoted as saying by Reuters.

Crude oil price outlook

Naveent Damani, Head of Research - Commodities, Motilal Oswal Financial Services, said that the Venezuela crisis may provide a modest risk premium, but oil prices will continue to be shaped primarily by global demand trends and OPEC policy, with geopolitical developments acting as a secondary influence, depending on the severity of the event and its impact on actual supply and demand balances.

Rahul Kalantri, VP Commodities, Mehta Equities, highlighted that Venezuela’s output has slipped below 1% of global production amid prolonged underinvestment, curbing its price influence. Meanwhile, ample global supply continues to weigh on the broader oil market.

Saudi Arabia’s third consecutive cut in selling prices to Asia highlights softer demand conditions, while OPEC+’s decision to pause supply increases in the first quarter offers near-term support, according to Kalantri.

Commenting on the daily trend, Kalantari expects crude oil prices to remain volatile in today’s session.

“Crude oil is having support at $57.10-56.20, and resistance is at $58.60-59.30 in today’s session. In INR crude oil has support at Rs5,190,-5,100 while resistance is at Rs5,345-5,395,” he said.

Meanwhile, Damani said that in the near term, a broad range between 5,000 ($55 for WTI) and 5,500 ($65 for WTI) could be seen. “Weakness towards 4,600 or $47 can also be a short-term possibility with the major trend change happening only above 5,500 or $63 levels.”

Disclaimer: This story is for educational purposes only. Please consult with an investment advisor before making any investment decisions.