Oil falls in about-face as Venezuela-driven bounce fades

By Amanda Cooper

LONDON (Reuters) - Oil fell on Thursday as concern over the global economy reasserted itself, reversing earlier price gains made on the potential for U.S. sanctions on Venezuela.

Brent crude futures were down 39 cents at $60.75 a barrel by 1150 GMT, while West Texas Intermediate (WTI) futures fell 26 cents to $52.36.

An unexpected rise in U.S. crude inventories reported the day before eclipsed possible U.S. sanctions on the Venezuelan oil sector.

Investors at present perceive oil supply to be fairly tight relative to demand, but given concern over the longer-term outlook for global economic growth, bullish drivers have been short-lived in the last couple of weeks.

"The chances for another down-day are not bad at all if you believe the confirmation of last night's (U.S. inventory) stats by the EIA this afternoon will actually put further downward pressure on prices. According to the API, all major categories built," PVM Oil Associates strategist Tamas Varga said.

The American Petroleum Institute said on Wednesday U.S. crude inventories rose by 6.6 million barrels in the latest week, versus expectations for a fall of 42,000 barrels. The U.S. Energy Information Administration reports official figures later on Thursday.

Earlier, oil hit a session high of $61.38 after the United States said it could impose sanctions on Venezuela's crude exports as the Latin American country descends further into turmoil.

Venezuelan oil is predominantly heavy crude, which requires extensive refining, and as such, is frequently blended with lighter crudes to give refiners higher-value products.

With Iran already crippled by U.S. sanctions on its oil, a further drop in Venezuelan exports could squeeze global supply and rapidly push up prices.

"The potential is that the U.S. is starting to put things in motion and the risk for an acceleration in the decline in production from Venezuela is increasing," Petromatrix strategist Olivier Jakob said.

"For now, it's not being fully priced in, but I think this does provide a new upside risk for the market."

Neither the Brent nor the WTI contract, both of which are backed by light, sweet crude, are linked directly to Venezuelan oil. But evidence of the concern around supply of heavy crudes is apparent in the U.S. physical market, where prices for Mars Sour, a medium crude, shot to their highest since early 2011 this week.

Concern about the U.S. trade war with China, as well as slower European growth and more fragile emerging economies, has undermined confidence in the oil market in the last few months.

The International Monetary Fund this week cut its forecasts for growth in 2019 and 2020.

(Additional reporting by Koustav Samanta in SINGAPORE and Colin Packham in SYDNEY; Editing by Dale Hudson)