Oil rally stalls near $80 as US readies sanctions against Venezuela

• WTI Oil popped to nearly $80 as the US threatened to reimpose sanctions on Venezuela. 
• Oil is still finding its way to importers through other producers. 
• The US Dollar Index firms ahead of the first Federal Reserve rate decision for 2024.

Oil prices are seeing a pickup in volatility on Wednesday, jumping towards the $80 psychological level, as the US said it stands ready to issue new sanctions against the Venezuelan Oil industry. With this move, The US appears to be leveraging political democratic elections in the Latin American country, after the leader of the opposition party got blocked by a court decision, barring Maria Corina Machado from the election.

Meanwhile, the US Dollar Index (DXY, is stuck in a tight technical range that has been underway for nearly two weeks now. With the first US interest-rate decision from the US Federal Reserve due later on Wednesday, markets will be plucking the speech from Chairman Jerome Powell for clues if March or rather June is the right moment for a first rate cut. The US Jobs Report, due on Friday, is also expected to cause a pickup in volatility.. 

Crude Oil (WTI) trades at $76.86 per barrel, and Brent Oil trades at $81.62 per barrel at the time of writing. 

Oil news and market movers: US picks battle with OPEC country

• Overnight numbers from the American Petroleum Institute (API) showed a drawdown of 2.49 million barrels last week.
• At 15:30 GMT, the Energy Information Administration (EIA) is due to release its weekly stockpile change number. Previous was a draw of 9.233 million barrels, while  a much smaller draw of 217,000 is expected.
• Two tankers carrying Russian Oil have been reported to be on their way to India to offload their cargo.
• Saudi Arabia has cancelled its plans to look into a production increase. The news was not picked up amidst the COP28 headlines. However, the kingdom is refraining from jacking up production as the US has substantially scaled up its exports.

Oil Technical Analysis: US picking fights

Oil prices tend to react to any possible disruption in the Oil market.  US sanctions on Venezuela would trigger a supply deficit in the current market, sending oil prices up. This is something that the US really wants to avoid, which makes the US a barking dog that might not actually bite. 

To the upside, resistance at $74 is in the rear view mirror and should act as support. Although price action came very near, $80 will not be easy to beat. Once $80 is broken, $84 is next on the topside. 

The $74 level will act as immediate support on any sudden declines. The $67 level could still come into play as the next support as it aligns with a triple bottom from June. Should that triple bottom break, a new low could be close at $64.35 – the low of May and March 2023 – as the last line of defence.

US WTI Crude Oil: Daily Chart