Oil prices fell to a near five-year low during the previous session over progress in Russia-Ukraine peace talks as an agreement could ease Western sanctions on Moscow, freeing up supply even as the market struggles with fragile global demand.Trump on Tuesday ordered a blockade of all sanctioned oil tankers entering and leaving Venezuela, adding that he now considers the country’s rulers a foreign terrorist organization.
However, crude oil traders in Asia said a rebound in futures buying after prices fell below $60 a barrel the day before was also a key driver of oil prices’ rise on Wednesday.
“The price is sentiment driven by today’s Venezuelan news, but overall, export volumes from Venezuela are relatively small in the global supply. With all eyes on the Russia-Ukraine discussions, the market is still at downside risk,” said a trader.
Another trader said the price rise is unlikely to last, adding that “it could be a good opportunity for some to build short positions.” Trump’s latest comments came a week after the US seized a sanctioned oil tanker off the coast of Venezuela.
It is unclear how many tankers would be affected and how the US will enforce the blockade against the sanctioned ships, and whether Trump will turn to the Coast Guard to ban ships as he did last week. In recent months, the US has moved warships to the region.
While many ships picking up oil in Venezuela are under sanctions, other ships carrying the country’s oil and crude from Iran and Russia have not been sanctioned. Tankers chartered by Chevron (CVX.N) are also transporting Venezuelan crude to the US under an authorization previously granted by Washington.
“Venezuelan oil production accounts for about 1% of global production, but supply is concentrated among a small group of buyers, mainly Chinese teapot refiners, the US and Cuba,” said Muyu Xu, senior oil analyst at Kpler.
“The ample supply in the sanctioned oil market is expected to limit any notable increase in Venezuelan crude oil prices in China, despite expected shipment disruptions,” Xu said.
China is the largest buyer of Venezuelan crude oil, accounting for about 4% of imports.
“In the near term, an extreme price increase is unlikely unless there are retaliatory actions that impact oil and gas systems in the broader US region, while global supply gluts remain at the forefront of trade focus,” said Emril Jamil, a senior oil analyst at LSEG.
“But over the longer term, any prolonged disruption could support heavy crude prices.”
#Oil #prices #rise #Trumps #blockade #Venezuela #fuels #uncertainty