U.S. Tanker Seizure Off Venezuela Coast Fails To End Oil Trading Doldrums

Traders also shrugged off the highly anticipated Fed rate cut: File Image/Pixabay

Despite a swelling of geopolitical tensions and a highly anticipated U.S. Federal Reserve cut finally being enacted, oil on Wednesday remained range bound – clouded by the chronic perception of the market falling into oversupply next year.

After the U.S. seized an oil tanker off the coast of Venezuela, Brent settled up a tepid 27 cents to $62.21 per barrel, and West Texas Intermediate settled up 21 cents to $58.46.

The seizure of the Very Large Crude Carrier, or VLCC, stoked fears that Washington was coming closer to a regime change-motivated attack on the South American country.

Meanwhile, the Fed announcing that it was lowering the target for its key lending rate by 0.25 percentage points (putting it in a range of 3.50 to 3.75 percent) seemed to have little if any impact on oil traders – possibly because the bank suggested that only one more cut would happen next year, unless new economic data dictated otherwise.

Also on Wednesday, and despite the ongoing peace talks between Russia and Ukraine, Ukraine attacked a shadow-fleet tanker linked to Russia's oil trade, making this at least the fifth attack on vessels with ties to Russia in December.

This caused Robert Rennie, head of commodity and carbon research at Westpac Banking Corp., to remark, "The US seizing a sanctioned vessel off Venezuela, and Ukraine attacking another Russian shadow-fleet vessel in the Black Sea should be adding more to the near-term sanction and war-risk premium.

"The developing super-glut will weigh on prices in 2026," and Rennie added that Brent should fall in the current range of $60 to $65 per barrel for now.