Oil settled slightly lower after trading near the highest price in almost 3 1/2 years.

(Bloomberg) -- Oil settled slightly lower after trading near the highest price in almost 3 1/2 years as new sanctions on Venezuela and shrinking U.S.

crude inventories spurred concerns about tightening worldwide supplies.

Futures fell 0.2 percent 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, buy Wellhead 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 oil rig flanges gulf coast 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 to settle at $72.13 a barrel on the New York Mercantile Exchange, after earlier touching $72.83. The July contract fell 15 cents to $72.20.

Brent futures for July settlement advanced 35 cents to $79.57 on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a $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 1 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 $70 from $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 percent 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

With assistance from Tsuyoshi Inajima and Grant Smith. To contact the reporters on this story: Catherine Ngai in New York at This email address is being protected from spambots. You need JavaScript enabled to view it.; Robert Tuttle in Calgary at This email address is being protected from spambots. You need JavaScript enabled to view it.. To contact the editors responsible for this story: Reg Gale at This email address is being protected from spambots. You need JavaScript enabled to view it. Mike Jeffers, Catherine Traywick.