Oil prices fell on Wednesday after President Donald Trump said the US had reached a deal to import $2 billion worth of Venezuelan crude. This move is expected to increase supplies to the world's largest oil consumer.
Brent crude futures fell 64 cents, or 1.1 per cent, to $60.06 a barrel by 05:50 GMT. Meanwhile, US West Texas Intermediate crude fell 82 cents, or 1.4 per cent, to $56.44 a barrel.
Both benchmarks extended declines of more than $1 from the previous trading session, as market participants expected ample global supply this year.
The deal could initially require cargoes that were bound for China to be rerouted.
Venezuela could be seeking to unload millions of barrels of oil that are stranded in tankers and storage facilities. This would be an effort to avoid additional escalation with the United States.
Trump had demanded that Venezuela open up to US oil companies or risk escalating military intervention. Following this, US forces captured illegitimate Venezuelan President Nicolas Maduro at the weekend.
Analysts say the agreement would keep prices low in an oversupplied market.
"Venezuela's oil exports to the United States have first and foremost disrupted the US market, which will also deepen the global oversupply," said Yang An, an analyst at Haitong Futures.
Morgan Stanley analysts estimated the oil market could reach a surplus of as many as three million barrels per day in the first half of 2026. This is based on weak growth in demand last year and rising supply from OPEC and non-OPEC producers.
However, the prospect of higher, cheaply extracted Venezuelan oil exports could pause expansion of productive capacity in the US and elsewhere, analysts at BMI said in a note on Wednesday.
Venezuela has been selling its flagship crude grade, Merey, at around $22 per barrel below Brent for delivery at its ports.
"That raises the expected price of oil over the medium term, especially if the Venezuelan regime survives," the BMI analysts said.
(Reporting by Sam Li, Florence Tan and Sudarshan Varadhan; Editing by Thomas Derpinghaus, Kirsten Donovan)
