© Reuters. FILE PHOTO: Oil pump jacks are seen at the Vaca Muerta shale oil and gas deposit in the Patagonian province of Neuquen, Argentina, January 21, 2019. REUTERS/Agustin Marcarian

By Stephanie Kelly

NEW YORK (Reuters) -After hitting seven-week highs, oil prices slumped 2% on Tuesday as Reuters reported that the United States could ease some restrictions on Venezuela’s government, raising hopes that the market could see some additional supplies.

Prices also fell after Federal Reserve Chairman Jerome Powell warned the economy could be hurt by attempts to reduce inflation.

For the first time since May 2020, the Brent international benchmark settled below U.S. West Texas Intermediate crude. Refiners worldwide have scrambled to find alternative energy supplies after Russia’s invasion of Ukraine. U.S. reserves are falling and that has raised the price for U.S.-based crudes, said Andrew Lipow, president of Lipow Oil Associates in Houston.

Brent crude fell $2.31, or 2%, to settle at $111.93 a barrel, and U.S. West Texas Intermediate (WTI) crude fell $1.8, or 1.6%, to settle at $112.40 a barrel.

Powell suggested there could be some economic pain involved in bringing inflation down. The U.S. central bank will “keep pushing” to tighten U.S. monetary policy until it is clear that inflation is declining, he said.

“Some of those comments tempered buying enthusiasm on the oil side,” said Phil Flynn, an analyst at Price Futures Group.

U.S. President Joe Biden’s administration will authorize U.S. oil company Chevron Corp (NYSE:CVX) to negotiate with Venezuelan President Nicolas Maduro’s government as soon as Tuesday, Reuters reported, citing sources. There is no final U.S. decision yet on renewing Chevron’s current limited license to operate in Venezuela, the source said.

Oil prices have generally been rising as Russian supply is squeezed by bans from several countries and an economic downturn due to broad sanctions on Moscow imposed by the United States and allies.

Russia’s production dropped by 9% in April, and the country, part of the OPEC+ group, produced far below levels required under a deal to gradually ease record output cuts made during the worst of the pandemic in 2020.

This month, non-Russian deliveries into the Polish port of Gdansk hit the highest in at least seven years, as refiners in eastern Germany and Poland switched.

“Ultimately, this is a supply-side story,” said Fawad Razaqzada, analyst at City Index. “Unless OPEC and its allies ramp up production and fast, it is difficult to see how prices can go down meaningfully.”

EU foreign ministers failed on Monday in their effort to pressure Hungary to lift its veto on the proposed oil embargo. But some diplomats now point to a May 30-31 summit as the moment for agreement on a phased ban on Russian oil.

U.S. crude and gasoline stocks fell last week, according to market sources citing American Petroleum Institute figures on Tuesday. U.S. government data is due on Wednesday. [API/S] [EIA/S]

© Reuters. FILE PHOTO: Venezuela’s President Nicolas Maduro and his wife Cilia Flores dance during the May Day celebrations in Caracas, Venezuela May 1, 2022. REUTERS/Leonardo Fernandez Viloria

By Vivian Sequera, Matt Spetalnick and Marianna Parraga

CARACAS/WASHINGTON (Reuters) -Venezuelan President Nicolas Maduro and the country’s opposition were expected to announce a resumption of talks as Washington eases some sanctions to help smooth the way for the negotiations, according to U.S. officials and others familiar with the matter.

U.S. President Joe Biden’s administration authorized U.S. oil company Chevron Corp (NYSE:CVX) to open talks with Maduro’s government, temporarily lifting a U.S. ban on such discussions, senior administration officials said on Tuesday.

Washington has not made a final decision on renewing Chevron’s current limited license to operate in Venezuela, several sources told Reuters. Chevron is the last U.S. oil producer to maintain a presence in Venezuela, home to the world’s largest crude reserves.

The United States was also poised to remove Erick Malpica, a former official of state oil company PDVSA and the nephew of Venezuela’s first lady, Cilia Flores, from a sanctions list, one U.S. official told Reuters on condition of anonymity.

The moves, which U.S. officials said were decided in consultation with Venezuela’s opposition, follow a visit to Caracas in March by the highest-ranking U.S. delegation in years, leading to the release of two U.S. detainees.

It was widely seen as a goodwill gesture by Maduro, who is under heavy U.S. sanctions along with his inner circle.

Maduro requested the U.S. lifting of sanctions on Malpica in the Caracas talks, two sources familiar with the matter said. The Venezuelan opposition said it did not ask for the delisting of any sanctioned officials. The White House did not immediately respond to a request for comment.

The Socialist leader also expressed a willingness to return to negotiations in Mexico with the opposition, which he abandoned in October, and sources said the two sides were expected as soon as Tuesday to set a date for resuming talks.

The talks are aimed at resolving Venezuela’s long-running political crisis, and Washington insists that any major lifting of sanctions will depend on progress at the table. The United States has recognized opposition leader Juan Guaido as legitimate president, condemning Maduro’s 2018 re-election as a sham. But Maduro remains in power.

Venezuelan Vice President Delcy Rodriguez said in a post on Twitter (NYSE:TWTR) that her government hopes the U.S. decision to ease some sanctions would pave the way for a total lifting of “the illegal sanctions that affect our people.”

‘GUARDRAILS’

The decision to allow contacts between Chevron and PDVSA – the centerpiece of Venezuela’s U.S.-sanctioned oil sector – has “guardrails” to prevent going beyond the narrow authorization to discuss “potential future activities” in the country, one of the officials said.

The latest U.S. moves, including the Chevron decision, were intended to help encourage renewed Mexico talks, and the steps are contingent on Maduro acting “constructively” in negotiations, officials said.

“It does not allow (Chevron) entry into any agreement with PDVSA or any other activity involving PDVSA,” a senior administration official told reporters. “So fundamentally what they’re doing is just allowed to talk.”

Despite that, Senator Robert Menendez, chairman of the Senate Foreign Relations Committee and Biden’s fellow Democrat, said in statement: “The Biden administration must refrain from lifting any additional sanctions until Maduro makes concrete concessions at the negotiating table.”

The senior administration official said sanctions relief would be calibrated in line with “ambitious, concrete and irreversible outcomes” in negotiations and warned that U.S. steps could be reversed if there was any backsliding by Maduro.

© Reuters.

By Yasin Ebrahim

Investing.com — U.S. crude oil inventories unexpectedly dropped last week, the API reported Tuesday, following a day of wild swings in oil prices on easing supply fears as President Biden could reportedly lift a ban on U.S. oil major Chevron (NYSE:CVX) doing business in Venezuela

West Texas Intermediate, the U.S. benchmark, traded at $110.52 per barrel following the report after settling down 1.6% at $112.40 per barrel.

U.S. crude inventories fell by 2.4 million barrels for the week ended May. 12. That compared with a build of 1.6 million barrels reported by the API for the previous week. Economists were expecting an increase of about 1.5 million barrels. 

The API data also showed that gasoline inventories fell by 5.1 million barrels last week, while distillate stocks increased by about 1.1 million barrels.

The official government inventory report due Wednesday is expected to show weekly U.S. crude supplies rose by about 1.4 million barrels last week.