Venezuela's woes have reached a point where the Organization of the Petroleum Exporting Countries (OPEC) - which has steadfastly downplayed any concern over the output losses of its once-mighty member - is now studying the matter to determine if relaxing its own output restrictions is warranted, sources familiar with the matter told Reuters.
Brent crude futures gained 71 cents, or 0.9 percent, to settle at $79.22 a barrel. The five-year Brent forward price has jumped over the last month, outpacing the gains in spot prices. As US production has expanded rapidly, infrastructure constraints continued to suppress WTI prices.
Brent crude oil jumped 1.5 percent to above $80 a barrel on Tuesday, supported by concern that falling Venezuelan crude output and a potential drop in Iranian exports could further tighten global supply.
"In my updated forecast, I calculated that Iran could decrease its production to 560,000 - 700,000 barrels per day at the end of 2018".
Markets are expected to remain volatile as traders digest the latest USA position on the Iranian nuclear deal.
Crude is trading at the highest since late 2014, underpinned by a supply-cutting deal among the Organisation of the Petroleum Exporting Countries plus Russian Federation and other non-members, and strong global demand.
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Strong global demand raised worldwide oil prices by more than domestic ones.
Currently, Saudi Arabia is looking to raise $100 billion either later this year or in early 2019 by selling 5 percent of the state energy giant, Saudi Aramco, which is believed to be worth $2 trillion.
Further compounding the problem, Reuters is reporting that Venezuela will be importing oil from Russian Federation to the tune of Dollars $440 million, to deliver it to Cuba as a part of its commitments to the island.
Non-OPEC oil producers such as Azerbaijan, Bahrain, Brunei, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Russia, Sudan, and South Sudan agreed to reduce output by 558,000 barrels per day starting from January 1, 2017.
The expected fall in exports from Iran of perhaps several hundred thousand barrels a day, joined with declines in a few other hot spots, helped push the worldwide crude benchmark Brent to $80 a barrel last week for the first time since 2014.
This worked as the volume of crude oil produced from the region increased after the consultations.
In addition, continuing production cut by Opec and Russian Federation, the forthcoming public offer proposed by the world's largest oil producer Saudi Aramco and US's decision to withdraw from Iran nuclear deal and reimpose sanctions on the oil rich country, would also keep the oil prices boiling.