Oil prices rose more than 1% on Wednesday following the US order to impose a blockade on Venezuela
Oil prices surged more than 1% as Trump's blockade of Venezuela increased uncertainty. A general oversupply slowed the rise.
Oil prices were subjected to new geopolitical tensions at a time of demand concerns after Trump ordered a "complete and total" blockade of all sanctioned oil tankers entering and leaving Venezuela.
Brent crude futures rose 79 cents, or 1.3%, to $59.71 a barrel at 05:00 GMT, while WTI crude rose 77 cents, or 1.4%, to $56.04 a barrel.
Oil prices had traded near five-year lows in the previous session, influenced by progress in Russia-Ukraine peace talks. A potential deal could lead to a relaxation of Western sanctions on Moscow and free up supply at a time when the market is grappling with fragile global demand.
On Tuesday, Trump ordered a blockade of all sanctioned oil tankers entering and leaving Venezuela and declared the country's leaders a foreign terrorist organization.
This move could affect 0.4-0.5 million barrels of oil per day and increase prices by $1-2 per barrel.
However, crude oil traders in Asia rebound in buying in futures after prices fell below $60 per barrel the previous day was also a significant factor in Wednesday's rise in oil prices.
The price is being affected by today's Venezuela news, but overall, Venezuelan export volumes are relatively small in terms of global supply share. Surely, with all eyes on the Russia-Ukraine talks, the market is still at risk of downside.
However, since the price increase is unlikely to last long, it may be sensible for some to take short positions.
While many ships receiving oil in Venezuela are under sanctions, other ships carrying the country's oil and crude oil from Iran and Russia are not. Tankers chartered by Chevron continue to transport Venezuelan crude oil to the US under a prior authorization granted by Washington.
China is the largest buyer of Venezuelan crude oil, accounting for approximately 4% of its imports.
Analysts say the oil market currently has a good supply balance, but crude oil prices could rise further if the embargo continues for an extended period.
In the short term, an extreme price increase seems unlikely unless retaliatory actions affect the broader American oil and gas systems; expectations of a global supply surplus remain at the forefront of trade focus.
Related Articles
Oil prices are rising as supply concerns increase amid expectations of a prolonged conflict in the Middle East
Oil prices continued to rise following US and Iranian attacks on ships serving their respective purposes
Oil prices closed higher this week following renewed US-Iran hostilities
