Oil Prices Rise 2% Amidst Venezuela Conflict, Supply Concerns

Oil prices rose about 2% on Thursday after two days of declines as investors assessed developments in Venezuela and on worries about supplies from Russia, Iraq and Iran.

Brent futures rose $1.21, or 2%, to $61.17 per barrel at 11:17 a.m. EST (1617 GMT), while U.S. West Texas Intermediate crude gained $1.02, or 1.8%, to $57.01.

The U.S. seized two Venezuela-linked oil tankers in the Atlantic Ocean on Wednesday, one sailing under Russia's flag, as part of U.S. President Donald Trump's aggressive push to dictate oil flows in the Americas and force Venezuela's socialist government to become an ally.

After capturing Venezuela President Nicolas Maduro in a Saturday military raid on Caracas, the U.S. is escalating its blockade of vessels that are under sanctions and going to and from the South American country, a member of the Organization of the Petroleum Exporting Countries oil producers group.

PRICES REVERT TO PRE-ATTACK LEVELS

"The complex is rebounding with the crude benchmarks back to about levels of last Friday’s close prior to the U.S. removal of Maduro," analysts at energy advisory firm Ritterbusch and Associates said in a note.

"The fact that this major development is having little impact on the energy complex is not surprising since the arrival of a meaningful amount of Venezuelan crude into the (U.S.) Gulf coast region could be years away," Ritterbusch said.

The U.S. could oversee Venezuela and control its oil revenue for years, Trump said in a New York Times interview published on Thursday. The U.S. Senate began voting on Thursday on a resolution that would block Trump from taking further military action against Venezuela without congressional authorization.

U.S. Energy Secretary Chris Wright said there was room to balance roles for both the U.S. and China in Venezuela to allow for commerce, but that Washington would not allow Beijing to have major control over the Latin American country.

In an interview on Fox Business Network, Wright also said he expected to see Chevron quickly grow its activities in Venezuela, with other U.S. oil majors ConocoPhillips and Exxon Mobil also looking to play a constructive role.

India's Reliance Industries, operator of the world's largest refining complex, on Thursday said it will consider buying Venezuelan oil if permitted for sale to non-U.S. buyers.

RUSSIA, IRAQ, IRAN AND YEMEN

A Russia-bound oil tanker suffered a drone attack in the Black Sea that prompted it to request Turkish Coast Guard assistance and divert from its course, according to a notice by Lloyd's List Intelligence and a separate maritime security source on Thursday.

Maritime data specialist Lloyd's List Intelligence said the Palau-flagged Elbus vessel "experienced an unmanned marine-vehicle and drone attack" on Wednesday targeting its engine room, and that no injuries were reported among the 25 crew, nor any pollution.

Ukrainian President Volodymyr Zelenskiy said on Thursday the text of a bilateral security guarantee between Kyiv and Washington was "essentially ready" to be finalised with Trump.

Russia said on Thursday that any troops sent to Ukraine by Western governments would be "legitimate combat targets", after Britain and France announced plans to deploy a multinational force there in the event of a ceasefire.

Any agreement that would lift sanctions on Moscow could allow Russia, the second-biggest oil producer in the world behind the U.S., to export more energy.

In Iraq, the cabinet has approved plans to nationalise operations at the West Qurna 2 oilfield, one of the world's largest, as the government looks to avert disruptions stemming from U.S. sanctions imposed on Russian stakeholder Lukoil.

State-run Basra Oil Company will take over the oilfield's operations for 12 months, two officials at the firm told Reuters.

In Iran, President Masoud Pezeshkian warned domestic suppliers against hoarding or overpricing goods, state media reported on Thursday, as Tehran rolls out high-stakes subsidy reforms during nationwide protests against economic hardship.

"Iran has a long history of protests, and there is no sign that the regime is on the verge of collapse. But depending on how the situation evolves, Iranian oil exports—equating to 2% of global supply (two times the level of Venezuela)—could be at risk," said Pavel Molchanov, investment strategy analyst at Raymond James.

Iraq and Iran are among the biggest oil producers in OPEC behind Saudi Arabia.

In Yemen, the Saudi-led coalition said on Thursday that the United Arab Emirates (UAE), another big OPEC producer, had spirited a separatist leader out of the country by boat in a dramatic twist to a rift between the Gulf powers, as Saudi-backed forces advanced to the port of Aden after losing ground there.

The escape of Aidarous al-Zubaidi, head of a UAE-backed southern separatist group, could exacerbate tensions between Saudi Arabia and the UAE, global oil heavyweights and both close allies of the United States.

(Reuters)