Oil prices surged on Wednesday, rising close to 2%, after U.S. President Donald Trump announced a full blockade of all sanctioned oil tankers entering and exiting Venezuela. The move injected fresh geopolitical uncertainty into energy markets already grappling with concerns about weakening global demand.
By 13:02 GMT, Brent crude futures were up 99 cents, or 1.7%, at $59.91 a barrel, while U.S. West Texas Intermediate crude gained 97 cents, or 1.8%, to $56.24 a barrel.
The rebound followed a weak prior session, when oil prices settled near five-year lows amid signs of progress in Russia-Ukraine peace negotiations. Any breakthrough in talks could potentially lead to the easing of Western sanctions on Moscow, increasing supply at a time when demand remains fragile.
On Tuesday, Trump ordered a blockade of all sanctioned oil tankers traveling to and from Venezuela and stated that he now considers the country’s leadership to be a foreign terrorist organization.
“Russian risks are well telegraphed, but there are clear risks to the Venezuelan oil supply,” ING analyst Warren Patterson said.
Trump’s remarks came just one week after U.S. authorities seized a sanctioned oil tanker off Venezuela’s coast.
However, significant uncertainty remains around the scope and enforcement of the blockade. It is unclear how many vessels will be impacted, how the United States will enforce the restrictions on sanctioned ships, or whether Trump will deploy the U.S. Coast Guard to intercept tankers, as occurred last week. In recent months, U.S. naval vessels have also been positioned in the region.
While many tankers loading crude in Venezuela are already under sanctions, others involved in transporting Venezuelan oil, as well as crude from Iran and Russia, have not been sanctioned. In addition, tankers chartered by Chevron (CVX.N) continue to ship Venezuelan crude to the United States under a waiver previously approved by Washington.
“Venezuelan oil production accounts for around 1% of global output, but supplies are concentrated among a small group of buyers, mainly Chinese teapot refiners, the U.S., and Cuba,” said Muyu Xu, senior oil analyst at Kpler.
China remains the largest purchaser of Venezuelan crude, accounting for roughly 4% of the country’s total oil imports.
Oil prices also found support from signs of tightening supply in the United States. Market sources cited data from the American Petroleum Institute showing that U.S. crude inventories fell by 9.3 million barrels last week.
If confirmed by official figures from the Energy Information Administration later on Wednesday, the decline would far exceed the 1.1 million-barrel drawdown forecast by analysts surveyed by Reuters.