Investing.com– Oil prices steadied Thursday following the prior session’s sharp losses, after the U.S. reimposed sanctions on Venezuela’s oil exports. 

At 09:00 ET (13:00 GMT), fell 0.1% to $87.27 a barrel, while climbed 0.2% to $82.84 a barrel by 21:51 ET (01:51 GMT). Both contracts tumbled around 3% on Wednesday. 

US to reimpose Venezuela sanctions

U.S. officials said on Wednesday that they will not renew a license allowing Venezuela to export oil, reimposing sanctions after President Nicolas Maduro failed to meet initial promises to hold national elections.

Still, the move was one step short of the “maximum pressure” policies adopted under former U.S. President Donald Trump, while officials signaled that they still held out hope that the country would hold fair elections.

Venezuela’s oil exports grew 12% in 2023 to about 700,000 barrels per day after the U.S. eased some sanctions on the country’s oil industry. While Venezuela does not pump oil any more, it has a massive pool of reserves.

US inventories grow more than expected 

The move could potentially further tighten global supplies, but has had limited impact after data showed U.S. grew more than expected for a fourth consecutive week, driven largely by strong production.

The reading further undermined bets that global markets will remain tight in the coming months, especially as the U.S. also kept up its pace of oil exports. 

But an outsized draw in and inventories showed that fuel demand in the world’s biggest consumer remained strong. 

Markets still remained on edge over elevated geopolitical tensions in the Middle East, although a lack of immediate retaliation by Israel over an attack by Iran spurred some bets that the situation will not worsen.

There remains significant uncertainty about Israel’s possible response to Iran’s attack over the weekend.

“US Treasury Secretary, Janet Yellen, said that the US will implement additional sanctions against Iran in response to its attack,” said analysts at ING, in a note.

“However, for oil, sanctions are already in place, the issue is that they have not been strictly enforced for the last couple of years. And the big question is whether they will be enforced more rigorously now. Will the Biden administration want to risk tightening up the oil market and pushing prices higher as we move closer towards US elections later this year?”

Higher-for-longer rate fears batter oil prices 

The biggest weight on oil prices this week was persistent concerns over higher-for-longer U.S. interest rates, following hawkish Federal Reserve commentary and signs of sticky inflation.

Markets feared that higher rates will weigh on economic activity and stymie global oil demand in the coming months. While the U.S. economy has so far remained resilient, other major economies, particularly China, have been struggling over the past year.

Strength in the also weighed on oil prices, given that a stronger dollar usually dissuades international buyers. 

(Ambar Warrick contributed to this article.)