Oil prices moved lower on Friday as market participants digested reports that the United States is close to obtaining long-term access to a portion of Venezuela’s crude reserves and monitored continued U.S.-Iran tensions over the Strait of Hormuz.
Price moves - By 20:41 ET (00:41 GMT), Brent futures were trading down 0.3% at $89.45 a barrel, while West Texas Intermediate crude was off 0.2% at $83.39 a barrel. Both contracts were on track to log weekly declines in the range of about 4% to 5.5% despite a marked recovery in prices on Thursday.
U.S. access to Venezuelan fields - Reuters reported that the Donald Trump administration is nearing a deal that would provide the U.S. with long-term access to part of Venezuela’s large oil resources. The arrangement is expected to be finalized soon and would allow the U.S. government to secure a group of Venezuelan oilfields for development by American companies, the report said.
Markets have reacted to the prospect of greater U.S. control over Venezuelan oil assets with concern about potential future increases in supply. Those concerns are tempered by analysts who caution that any meaningful uptick in output would not be immediate, given the extensive development work required on Venezuela’s oil infrastructure.
Another report noted Caracas is weighing an exit from the Organization of Petroleum Exporting Countries amid warming ties with Washington. That step would follow what was described as the United Arab Emirates also choosing to leave the producer group.
Strait of Hormuz and regional signals - Oil also felt pressure from earlier accounts that Iran and Oman agreed to permit some traffic through the Strait of Hormuz. Iran said on Thursday it was preparing a list of conditions for reopening the waterway. Before the current U.S.-Iran conflict, the channel handled roughly a fifth of global oil flows, and the prospect of resumed traffic helped cap some upside in crude prices.
Crude pared some of its weekly decline on Thursday after a Wall Street Journal report indicated that Trump had no interest in returning to a June peace deal with Iran. Tehran has repeatedly urged the United States to adhere to the June deal’s terms as a prerequisite for further negotiations; that agreement lapsed earlier in August.
Market outlook - The combination of potential additional supply avenues tied to U.S. access to Venezuelan oilfields and evolving signals about traffic through the Strait of Hormuz left oil futures modestly lower at the end of the week. While the structural prospect of increased Venezuelan production is a factor weighing on prices, market participants noted that any actual supply response would likely be delayed by the technical and development work needed on Venezuelan assets.
For now, traders appear to be balancing the implications of near-term diplomatic steps in the Gulf against longer-term operational realities in Venezuela, resulting in the muted downward moves observed on Friday.