Oil prices were near two-month highs on Monday, putting July on track to become the strongest month so far this year, as news of a producers’ meeting next week added to bullish sentiment driven by the threat of US sanctions against OPEC-member Venezuela.
Benchmark Brent crude LCOc1 traded down 19 cents or .36 percent at $52.33 a barrel at 12:00 p.m. (1600 GMT). Brent earlier hit $52.92 a barrel, its highest since May 25.
US crude had jumped above $50 a barrel for the first time in two months early in the session, after US officials said sanctions on Venezuela could be announced as early as Monday.
The United States is considering imposing sanctions on the country’s oil sector in response to Sunday’s election of a constitutional super-body, which Washington has denounced as a “sham” vote.
Even though the White House has said that “all options are on the table,” the most likely action, banning Venezuela from importing US oil, could come as early as Monday.
A Reuters survey on Monday indicated output from OPEC members rose, mostly from adjustments upward to Iraqi and Saudi output.
“The upward revision by 200,000 in June for OPEC-13 is quite shocking,” said Commerzbank senior oil analyst Carsten Fritsch, “Compliance already slipped sharply in June to 77% (initially reported at 92%).”
However some OPEC and non-OPEC members will meet on Aug. 7-8 in Abu Dhabi to assess how the group can increase compliance with production cuts that began on Jan. 1.
Hedge funds and money managers have raised bullish bets on US crude oil to their highest in three months, US data showed.
In Europe, a production outage at Shell’s 404,000 barrel-per-day Pernis refinery in the Netherlands following a fire sent benchmark European diesel margins, which reflect the profit made from refining crude oil into the road fuel, to their highest since November 2015 at $14.60 a barrel.
US production has hampered efforts to rebalance the market but signs the market is tightening have emerged after heavy inventory falls and slower new oil rig additions last week.
US crude inventories have fallen by 10 percent from their March peaks to 483.4 million barrels. C-STK-T-EIA
US output dipped by 0.2 percent to 9.41 million barrels per day (bpd) in the week to July 21, after rising by more than 10 percent since mid-2016. C-OUT-T-EIA
Drilling for new U.S. production is also slowing, with just 10 rigs added in July, the fewest since May 2016.