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Data: EIA; Chart: Andrew Witherspoon/Axios

Oil prices have been rising this week. But here's the more interesting thing: they're not going bananas these days, not at all, despite a good dose of geopolitical turbulence and market intervention, including U.S. sanctions.

The big picture: Prices are up in recent days (Brent is pushing $62 per barrel and WTI is above $54), but they're still more than $20 below the elevated early-October levels, which were four-year highs.

Why it matters: It's a sign of an oil market that has been transformed by the rise of U.S. shale production and other forces. Center for Strategic and International Studies analyst Sarah Ladislaw summed things up in a tweet yesterday...

"Just wanted to point out that we are living in a scenario where the U.S. is sanctioning Venezuelan crude oil exports (effectively) and Iranian oil exports, OPEC is cutting, Alberta is curtailing, and oil price today is still around $60/54 (brent/WTI)."

The intrigue: I chatted with Ladislaw about why this is happening, when it really should be a cocktail for very high prices right now.

  • "We are in a time where there is a lot of market intervention for geopolitical reasons and there is little to no geopolitical risk in the price right now," she tells me.
  • "It's hard to move prices when the prevailing sentiment is that markets are very well supplied in a number of different directions, and there is an economic malaise around expectations for oil demand growth," Ladislaw adds.
  • Yes, the sanctions are sending Gulf Coast refiners who use heavy Venezuelan oil searching for replacement barrels and that will affect pricing for specific grades. Venezuela is an important supplier, as the chart above shows.
  • But, overall, the market is absorbing the news for now.

Where it stands: U.S. production, already at record levels, continues to rise and is now approaching 12 million barrels per day. Ladislaw notes that it has consistently been beating expectations.

  • Venezuelan production has been cratering for a while, so that's somewhat baked into the cake.
  • But she points out that the landscape has changed in other ways that also temper the friction, such as: "We have already done Iran sanctions once before. There is a little bit of muscle memory in the market for dealing with an environment in which you have to find alternatives for Iranian barrels."

The latest: Via Reuters, "Oil prices steadied after two days of gains on Thursday, as lower-than-expected U.S. fuel stock rises and U.S. sanctions on Venezuelan output boosted investor confidence but U.S.-China trade tensions weighed on sentiment."

Go deeper: Unpacking Trump's Venezuelan oil move

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