Oil prices rise on Iran sanctions worries, falling Venezuelan output

Oil heads up to $74 a barrel, but US bonds, crude supply cast a pall

Oil prices were mixed on Thursday as the market weighed up the risk of renewed US sanctions on Iran and plunging Venezuelan output against a backdrop of strong demand, above all in Asia, the world's biggest oil-consuming region.

Venezuela's plunging output comes amid strong demand as well as concerns that supplies from the Middle East, by far the world's biggest oil producing region, could also be disrupted, especially should the United States in May re-impose sanctions against OPEC-member Iran. While French President Emmanuel Macron has proposed a new deal to offer Trump, the markets will need to wait to see if the President will extend the sanction waivers.

Global benchmark Brent crude futures were up 39 cents at $74.39 a barrel at 11:36 a.m. EDT (1536 GMT), while U.S. West Texas Intermediate (WTI) crude slipped 13 cents to $67.92 a barrel.

US President Donald Trump will decide by May 12 whether to restore US sanctions on Tehran, which would likely result in a reduction of its oil exports.

A recent Kotak Institutional Equities report states that the worsening socio-economic conditions in Venezuela, a major crude oil exporter, has led to oil production in the country falling from 2 million barrels per day (mbpd) in August 2017 to 1.5 mbpd in March 2018.

The EIA yesterday reported that US drillers had produced an average 10.586 million barrels daily in the week to April 20, a record-breaking production rate.

US crude oil and gasoline inventories unexpectedly rose last week even as exports hit record highs, the Energy Information Administration said on Wednesday in an overall bearish report that raised some concerns about oversupply.

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US crude stocks rose last week as refineries cut output, while gasoline stocks increased and distillate inventories fell, the Energy Information Administration said on Wednesday.

USA crude production rose by 46,000 bpd on the previous week, to 10.59-million bpd.

Futures ended the session 0.2% higher, closing above $68 a barrel for a third time this week.

Oil prices settled slightly higher on Wednesday even though EIA data showed a surprise increase in the crude stockpiles.

Combined exports of crude and petroleum products also hit a weekly record at 8.3 million bpd, of which more than 6 million bpd was from products like gasoline and diesel fuel.

"Market sentiment is turning increasingly bullish towards the commodity", said Lukman Otunuga, research analyst at futures brokerage FXTM.

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