Chevron Ouster And Trump Tariff Block Cause Oil To Extend Its Gains

Meanwhile, OPEC decides not to tamper with output - for now: File Image/Pixabay

Fickle oil traders on Wednesday pivoted effortlessly from worrying about global oversupply to expressing concern about supply tightness due to Chevron's Venezuelan crude curbs coming into effect.

As a result, Brent settled up 81 cents to $64.90 per barrel, and West Texas Intermediate settled up 95 cents at $61.84 per barrel.

Also stoking analytical concerns over supply was the decision of the Organization of the Petroleum Exporting Countries (OPEC) not to change output policy for the time being; expectations were that the cartel would agree to a production increase this week.

However, one OPEC delegate told media that another increase in July was likely, and a second delegate said the hike might be as steep as 411,000 barrels per day (bpd), the same volume of output that is scheduled to rise in each of May and June.

Goldman Sachs analysts stated, "We see the risks to our OPEC supply path as skewed to the upside, especially if compliance doesn't improve or if hard demand data surprise further to the upside."

Janiv Shah, vice president of oil commodity markets analysis at Rystad Energy, added that the annual wildfires in Canada could also impact supply, and that, combined with an increase in consumption due to the summer driving season, could send crude prices higher.

Oil's Wednesday gains were also said to have benefitted by the U.S. Court of International Trade ruling that president Donald Trump exceeded his authority to impose tariffs on nearly all imports and barring his April 2 "Liberation Day" tariffs from taking effect; however, Washington can appeal via federal court.

Yet more good news for bulls: the American Petroleum Institute reported that U.S. crude inventories fell by 4.2 million barrels in the week ending May 23, compared to expectations of a 1-million barrel build; gasoline inventories were also said to have dropped by 528,000 barrels over the same week (gasoline stocks are already 2 percent below the five-year average for this time of year).