By Stephanie Kelly

NEW YORK, (Reuters) – Oil prices fell 2% Tuesday after hitting seven week highs. Reuters reports that Venezuela could be allowed to relax some of its restrictions, which raises hopes for more supplies.

After Jerome Powell, Chairman of the Federal Reserve warned that inflation could hurt the economy, prices also dropped.

The price of crude oil in the United States fell by $2.31 or 2% to $111.93 per barrel. U.S. West Texas Intermediate Crude (WTI), fell $1.8, or 1.6% to $112.40 per barrel.

Powell indicated that there may be economic pain in trying to bring down inflation. He said that the U.S. central banking will keep pushing to tighten U.S.monetary policy until it becomes clear that inflation has fallen.

Phil Flynn from Price Futures Group, an analyst said that some of these comments dampened buying enthusiasm for the oil sector.

The administration of U.S. President Joe Biden will allow U.S. Oil Company authorization Chevron Corp (NYSE 🙂 is expected to begin talks with Venezuelan President Nicolas Maduro’s administration as early as Tuesday. The source stated that the U.S. has not yet made a decision regarding renewing Chevron’s limited Venezuelan operating license.

The Russian bans on several countries have pushed up oil prices and caused an economic slump due to the broad sanctions against Moscow that were imposed by the United States.

Russia’s April production fell by 9% and Russia is part of the OPEC+ organization. This country produced well below what was required in a deal to slowly ease the record output reductions that were made during the worst pandemic in 2020.

Non-Russian imports into Gdansk, Poland, reached their highest level in seven years. This was due to the switch of refiners from Poland and eastern Germany.

Fawad Razaqzada from City Index, an analyst, said that “in the end, this is a supply side story.” “Unless OPEC, its allies and other producers ramp up their production fast it’s difficult to see prices falling meaningfully.”

The EU foreign ministers were unsuccessful Monday in trying to force Hungary to remove its veto of the oil embargo. Some diplomats see a May 30-31 summit to reach an agreement on a phased suspension of Russian oil.

Market sources on Tuesday cited American Petroleum Institute statistics as indicating that gasoline stocks dropped last week. Data from the U.S. government is expected on Wednesday. [API/S] [EIA/S]

(The article has been updated to correct the paragraph and bullet regarding Brent discount to WTI. The first-month Brent crude oil futures are July. While first-month WTI forwards are June.