Oil prices rise 1.5% due to Trump’s blockade of Venezuela

Oil prices rose by more than one percent today, Wednesday, after US President Donald Trump’s decision to impose a “complete and comprehensive” blockade on all sanctioned oil tankers entering and leaving Venezuela, which led to escalating geopolitical tension in light of concerns about demand. !

Brent crude futures increased 87 cents, or 1.5 percent, recording $59.79 per barrel by 07:30 GMT, while US West Texas Intermediate crude rose 85 cents, or 1.5 percent, to $56.12.

The price of both crude oil fell at settlement yesterday, Tuesday, approaching its lowest levels in five years in light of the progress made in the Russian-Ukrainian peace talks, as a possible agreement is expected to result in an easing of Western sanctions imposed on Moscow, allowing an increase in supply even in light of weak global demand.

Yesterday, Tuesday, Trump ordered a blockade on all sanctioned oil tankers entering and leaving Venezuela, adding that he now considers Venezuela’s rulers a foreign terrorist organization.

However, crude oil dealers in Asia pointed to the recovery in futures purchases, following yesterday’s price drop below $60 per barrel, as one of the main factors behind the rise in oil prices today.

One of them said: “The price is moving affected by sentiment as a result of Venezuela’s news today, but in general, Venezuela’s export volumes remain relatively small within the share of global supplies. All eyes are on the discussions between Russia and Ukraine, and the market is still exposed to downside risks.”

Another trader said prices were unlikely to continue rising, adding: “It may be a good opportunity for some to build short selling positions.”

Trump’s latest comments came a week after the United States seized a sanctioned oil tanker off the coast of Venezuela. It is not clear how many oil tankers might be affected, how the United States will impose the blockade on the ships subject to sanctions, and whether Trump will resort to the Coast Guard to intercept ships as he did last week. Over the past few months, the United States has sent warships to the region.

While many ships carrying oil in Venezuela are subject to sanctions, other ships transporting the country’s oil, as well as crude oil from Iran and Russia, have not been subject to sanctions. Tankers chartered by Chevron transport Venezuelan crude oil to the United States under a mandate previously granted by Washington.

“Venezuela’s oil production represents approximately one percent of global production, but supplies are concentrated with a small group of buyers, led by small independent Chinese refineries, along with the United States and Cuba,” said Kpler’s chief oil analyst, Moyu Xu.

“The abundance of supply in the sanctioned oil market is expected to limit any noticeable rise in the price of Venezuelan crude oil in China, despite the expected disruption in shipments,” she added.

China is the largest buyer of Venezuelan crude oil, which accounts for about four percent of its imports.

“In the near term, a sharp rise in prices is unlikely unless countermeasures are taken affecting oil and gas systems in the Americas, while expectations of global oversupply remain at the forefront of trading concerns,” said Imril Jamil, chief oil analyst at London Stock Exchange Group.

He added, “But in the long term, any prolonged disruption may support the prices of heavy crude oils.”