Oil settled slightly lower after trading near the highest price in almost three and a half years as new sanctions on Venezuela and shrinking U.S. crude inventories spurred concerns about tightening worldwide supplies.

Futures fell 0.2 per cent on Tuesday after rising earlier. President Donald Trump’s latest sanctions against the regime of Venezuelan leader Nicolas Maduro that threaten to further choke the Latin American nation’s already-hobbled petroleum industry. Meanwhile, a U.S. government tally on Wednesday is expected to show crude inventories fell for a third straight week, which would be the longest streak of declines since January.

“The fundamental picture continues to show signs of tightening,” said Gene McGillian, market research manager at Tradition Energy. “The uncertainty on geopolitical issues is also contributing to the rally.”

Oil is trading at the highest levels since late 2014 as Middle East conflicts, U.S. sanctions on Iran and plunging Venezuelan output intensify supply concerns. The Organization of Petroleum Exporting Countries and allied nations have been curbing output since the start of 2017 to prop up prices.

Still, some traders were cautious about how durable the rally will be, given weakness in the spread between futures contracts pegged to different months, a gauge of the health of the physical market. OPEC may raise oil output as soon as June on concerns about Venezuelan production and possible Iranian supply shortages, Reuters reported, citing OPEC and oil industry people that weren’t identified.

“That means inventories wind down a little slower than people thought,” Bart Melek, head of global commodity strategy at TD Securities in Toronto, said by phone.

West Texas Intermediate for June delivery, which expired Tuesday, fell 11 cents US to settle at US$72.13 a barrel on the New York Mercantile Exchange, after earlier touching US$72.83. The July contract fell 15 cents US to US$72.20.

Brent futures for July settlement advanced 35 cents US to US$79.57 on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a US$7.37 premium to WTI for the same month.

U.S. PRESSURE

Trump issued an order on Monday prohibiting purchases of debt owed to Venezuela including Petroleos de Venezuela SA, the Latin American nation’s state-owned oil company. The move followed a first wave of restrictions last year that banned the purchase of new debt from the government.

Venezuelan crude output may drop below one million barrels a day in the coming months from an April level of 1.5 million, Barclays Plc said in a May 18 report, raising its 2018 forecast for Brent to US$70 from US$63.

The International Energy Agency has started discussions with major oil-producing countries about their ability “to make up the loss from Venezuela or elsewhere,” Executive Director Fatih Birol said in a Bloomberg Television interview.

In the U.S., crude inventories probably fell by 1.9 million barrels last week, according to the Bloomberg survey of analysts. Stockpiles at the key storage hub at Cushing, Oklahoma, fell by an estimated 250,000 barrels.

Other oil-market news:

U.S. Secretary of State Mike Pompeo demanded that Iran halt all uranium enrichment, stop its ballistic-missile program and give nuclear inspectors access to the entire country Venezuela to lose further 500,000 barrels a day of output by year end, according to oil trader Gunvor’s chief economist Thunderstorms and low pressure off Belize has 40 per cent chance of becoming a tropical or sub-tropical system as it moves into the eastern Gulf of Mexico Russia was said to renew talks on lowering oil taxes on downstream