DTN Oil

WASHINGTON (DTN) -- New York Mercantile Exchange oil futures and Brent crude traded on the Intercontinental Exchange flipped between modest gains and losses on Thursday following reports the Biden Administration drafted a sanctions relief proposal for Venezuela in exchange for the restart of democratic elections as investors in broader markets turned cautious ahead of Federal Reserve Chairman Jerome Powell's speech on Friday.

Wire services reported the White House is in direct talks with the government of Nicholas Maduro of Venezuela to ease crippling sanctions on oil exports in exchange for concrete actions toward restoring democracy, including free and fair elections. Bloomberg News reported that preliminary negotiations involve senior officials from both nations, including Venezuela's head of congress, Jorge Rodríguez.

Washington has tried for years to encourage negotiations between Maduro and the political opposition but achieved little to no progress. Sanctions on oil exports were imposed following Maduro's 2018 re-election, which many Western nations considered a sham.

Venezuela's oil production plunged to 450,000 bpd at its low in 2020 before recovering to about 800,000 bpd over the June-July period. Global Strategy at Citigroup forecasts Venezuela's oil production could climb to 1 million bpd by the end of the year.

In financial markets, the U.S. dollar index inched closer to 104 against a basket of global currencies, lifted by expectations that Powell would reinforce the "higher-for-longer" narrative regarding interest rates during his speech at Jackson Hole, Wyoming. Powell is scheduled to deliver his keynote address, titled "Economic Outlook," at 10:05 a.m. ET Friday. Ahead of the event, investors digested comments from Philadelphia Fed President Patrick Harker, who in an interview with CNBC on Thursday, said the central bank probably has done enough to cool inflation but restrictive policy should be kept in place for a while.

"I see the central bank keeping rates where they are all this year, if inflation comes down next year, we could cut rates," said Harker.

Government data released earlier today showed unemployment claims in the United States ticked down to 230,000 during the week ended Aug. 19 from 239,000 reported in the prior week. The labor market continues to show exceptional strength, adding an average of 270,000 new jobs in the first six months of the year while the unemployment rate hovers near an all-time low 3.5%.

Unlike economies in Eurozone and Asia, the strong labor market in the U.S. has supported personal consumption, which is evident by retail sales that jumped 0.7% last month for the largest gain since the beginning of the year.

With payroll and consumer spending trends remaining reasonably strong, the Fed's task now is to finetune monetary policy just right to keep pressure on inflation without causing undue stress on the economy along with job losses.

In contrast, macroeconomic data and business trends from economies such as the Eurozone, United Kingdom and China have already declined perceptibly. Economic activity across the Eurozone contracted in August at an accelerating pace, with the region's downturn spreading further from manufacturing to services. At 47.0, the seasonally adjusted Purchasing Managers Index for the Eurozone fell last month to the lowest level since November 2020, with both components of the index, manufacturing and services, sliding into contraction.

"The service sector of the eurozone is unfortunately showing signs of turning down to match the poor performance of manufacturing," commented Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank.

The data is consistent with Eurozone Gross Domestic Product falling by 0.2% in the third quarter.

At settlement, NYMEX West Texas Intermediate October futures edged higher to $79.05 bbl, up $0.16, and the international crude benchmark Brent contract gained $0.15 to $83.36 bbl. Gains in product contacts outpaced those for crude, with NYMEX ULSD futures rallying $0.0273 to $3.1564 gallon and NYMEX RBOB September futures firmed $0.0112 to $2.7800 gallon.

Liubov Georges can be reached at Liubov.Georges@dtn.com