Elsewhere, the head of Russian oil giant Rosneft, Igor Sechin, has written to the Russian President Vladimir Putin saying Moscow's deal with the Organization of the Petroleum Exporting Countries (OPEC) to withhold output is a strategic threat and plays into the hands of the United States.
The agency also lowered its forecast for demand for OPEC crude, production of which the group has pledged to cut by 800,000 bpd this year as part of an agreement with Russian Federation and other non-OPEC producers such as Oman and Kazakhstan.
"We believe that oil is not pricing in supply-side risks lately as markets are now focused on U.S".
The new round of sanctions targeting Iran's oil sector were put in action on November 4, 2018.
WTI prices were also weighed down by the closure of a 120,000 barrels per day (bpd) crude distillation unit (CDU) at Phillips 66's Wood River, Illinois, refinery following a fire on Sunday.
At the start of the year, the investment bank had reduced its outlook for oil prices this year citing abundant supply.
Oil production in Venezuela, which has been rocked by a crippling economic crisis, spiralling political turmoil and USA sanctions, meanwhile sank by 59,000 barrels per day.
Previous pacts by OPEC and its partners including Russian Federation, often called OPEC+, to cut back production have been marked by initial low compliance rates by certain countries.
Growing U.S. supply and a potential economic slowdown this year could also cap oil markets.
With more than 20 years' trading experience, Ed Moya is a market analyst with OANDA, producing up-to-the-minute fundamental analysis of geo-political events and monetary policies in the US, Europe, the Middle East and North Africa.
Venezuela accounted for 1 million bpd of heavy-sour crude production out of a worldwide total of 7 million bpd in 2017 ("World Oil Review", ENI, 2018).
The U.S. administration likely calculated any fallout from sanctions on oil prices would be small given the limited volumes of crude involved and the expectation that the standoff would be resolved quickly.
Hassan Rouhani's government would face even a much worse scenario if the US decides to bring Iran's oil exports down to zero.
While remaining volatile, oil prices have rallied to just above $60 a barrel and jumped more than a dollar after the Opec production update.
The sudden embargo on Venezuela's exports has therefore sent refiners in the United States and elsewhere scrambling to find alternative supplies compatible with their equipment.
"In quantity terms, in 2019, the US alone will grow its crude oil production by more than Venezuela's current output".
John Kemp is a Reuters market analyst.