Before the EIA report, benchmark West Texas Intermediate (WTI) crude for July delivery traded down about 0.2% at around $72.01 a barrel, and it dropped to around $71.30 (down about 1.2%) shortly after the report's release.
Beyond Venezuela's production woes, geopolitical concerns that USA sanctions on Iran could curb the country's crude exports have led prices to trade higher in recent weeks.
Higher prices are allowing an increasing number of shale oil producers to ramp up production, especially in the United States. OPEC will also decide whether to prolong its oil output cuts at a meeting in Vienna next month. While rates of global production have slowly risen, it's unlikely that oil producers will be able to keep up with demand thanks to restrained production in both the United States and Saudi Arabia.
Amid worries over supply from OPEC majors Venezuela and Iran, the global benchmark Brent futures were down 15 cents, or 0.19 per cent, at $79.65 per barrel. United States crude futures were trading at around r$69 per barrel, while Brent crude was worth about $77 per barrel.
As the daily chart below shows, the price remains within a rising channel in place since mid-April but a slide towards the channel support line seems possible after those two successive failed attempts to top $80, which is seen as an important level psychologically.
Hedge funds lowered their Brent net-long position by 8.6 percent in the week ended May 22 to 501,634 contracts, according to ICE Futures Europe data on futures and options released Friday.
Then late Tuesday the oil-producing cartel known as OPEC suggested it may soon turn on the spigots a little, after curbing its supply for the better part of the past year to boost prices. That's expanding the nation's surplus of the fuel as American production tops 10 million barrels a day.
The Trump decision to renew USA sanctions on Iran could cut as much as half a million barrels a day from Iranian oil exports. So, for the working week that ended on May 18, the country's oil reserves fell by 1.3 million barrels.
"Higher prices have begun to impact forward demand expectations and OPEC and Russian Federation, being willing and able to increase production, may have been looking for a way out of the deal which would not upset the market too much", he said.