Rise in US crude inventories eclipses possible US sanctions on Venezuelan oil sector. PHOTO: FILE
Brent crude futures LCOc1 were down $0.39 at $60.75 a barrel by 1150 GMT, while West Texas Intermediate (WTI) futures CLc1 fell $0.26 to $52.36.
An unexpected rise in US crude inventories reported the day before eclipsed possible US sanctions on the Venezuelan oil sector.
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Investors at present perceive oil supply to be fairly tight relative to demand, but given concern over the longer-term outlook for global economic growth, bullish drivers have been short-lived in the last couple of weeks.
"The chances for another down-day are not bad at all if you believe the confirmation of last night's (US inventory) stats by the EIA this afternoon will actually put further downward pressure on prices. According to the API, all major categories built," PVM Oil Associates strategist Tamas Varga said.
The American Petroleum Institute (API) said on Wednesday US crude inventories rose by 6.6 million barrels in the latest week, versus expectations for a fall of 42,000 barrels. The US Energy Information Administration (EIA) was expected to report official figures later on Thursday.
Earlier, oil hit a session high of $61.38 after the United States said it could impose sanctions on Venezuela's crude exports as the Latin American country descends further into turmoil.
Venezuelan oil is predominantly heavy crude, which requires extensive refining, and as such, is frequently blended with lighter crudes to give refiners higher-value products.
With Iran already hit by US sanctions on its oil, a further drop in Venezuelan exports could squeeze global supply and rapidly push up prices.
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"The potential is that the US is starting to put things in motion and the risk for an acceleration in the decline in production from Venezuela is increasing," Petromatrix strategist Olivier Jakob said.
"For now, it's not being fully priced in, but I think this does provide a new upside risk for the market."
Neither the Brent nor the WTI contract, both of which are backed by light, sweet crude, are linked directly to Venezuelan oil. But evidence of the concern around supply of heavy crudes is apparent in the US physical market, where prices for Mars Sour WTC-MRS, a medium crude, shot to their highest since early 2011 this week.
Concern about the US trade war with China, as well as slower European growth and more fragile emerging economies, has undermined confidence in the oil market in the last few months.
The International Monetary Fund this week cut its forecasts for global growth in 2019 and 2020.
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