U.S. crude hit its highest level since 2014 on Monday amid rising concerns that Venezuela's oil output could fall further following the country's presidential election and potential sanctions on the OPEC-member nation.
Prices firmed further as U.S. President Donald Trump had discussions with Russia and China about issuing new debt to Venezuela. Trump signed an executive order on Monday restricting Venezuela's ability to liquidate state assets, a senior administration official told reporters.
Any restriction on Venezuela's financing, logistics or power supply could further depress the country's crude output.
"It's been going down for a bit, but there is an expectation that the decline will accelerate," said Jamie Webster, senior director of the Center for Energy Impact at the Boston Consulting Group. "There's increasingly a view that this could be as bad as Libya was in its worst days - that production could fall to a very small percent of what it is capable of doing."
U.S. crude futures settled 96 cents, or 1.4 percent, firmer at $72.24 a barrel, after touching $72.33, the highest since November 2014. In post-settlement trade, the benchmark hit a fresh 3-1/2 year high at 72.41.
Brent crude futures gained 71 cents, or 0.9 percent, to settle at $79.22 a barrel.
Venezuela's socialist President Nicolas Maduro faced widespread international condemnation on Monday after his re-election in a weekend vote his critics denounced as a farce cementing autocracy in the crisis-stricken oil producer.
The United States is actively considering oil sanctions on Venezuela, where output has dropped by a third in two years to its lowest in decades.
"The specter of U.S. oil sanctions on the embattled Latin American producer now looms large as Washington strives to tighten the financial noose," PVM Oil Associates strategist Stephen Brennock said in a note.
Brent pushed past $80 a barrel last week for the first time since 2014, and the market may again try to clear that hurdle, said Gene McGillian, vice president of research at Tradition Energy in Stamford, Connecticut.
"It seems as if the pull backs are just short-term profit taking and we will see whether people are going to be willing to drive the market through $80 again," he said.
Beyond Venezuela's production woes, geopolitical concerns that U.S. sanctions on Iran could curb the country's crude exports have led prices to trade higher in recent weeks.
Additionally, a possible U.S. trade war with China is "on hold" after the world's two largest economies agreed to drop their tariff threats while they work on a wider trade agreement, U.S. Treasury Secretary Steven Mnuchin said on Sunday, giving global markets a lift in early Monday trade.
Stabilizing trade relations between the countries could boost oil demand, Tradition's McGillian said.
Rising output from U.S. shale and key OPEC producers could end the rally, BP Chief Executive Bob Dudley told Reuters. Dudley said he expected a flood of U.S. shale and a possible reopening of OPEC taps to cool oil markets after crude rose above $80 a barrel last week.
Dudley said he saw oil prices falling to between $50 and $65 because of surging shale output and OPEC's capacity to boost production to cover a potential shortfall in Iranian supplies owing to U.S. sanctions.
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