Oil prices rose on Wednesday morning as supply concerns increased after US President Donald Trump ordered a “complete and total” blockade of sanctioned oil tankers moving in and out of Venezuela.
Brent, the benchmark for two thirds of the world's oil, was up 1.37 per cent at 11.02am UAE time to $59.73 a barrel, while West Texas Intermediate, the gauge that tracks US crude, was trading 1.45 per cent higher at $56.07 a barrel.
This came after WTI fell to its lowest levels since early 2021 this week on the prospect of more Russian oil entering global markets as peace talks to end the Ukraine war gain momentum.
Rising supply risk from Venezuela is offering only “marginal support” to crude, because of the country’s relatively small export volumes, said Vandana Hari, chief executive of Singapore-based Vanda Insights.
However, upbeat US rhetoric over a Ukraine peace deal, and expectations of a milder-than-normal Northern Hemisphere winter are putting downwards pressure on oil prices on oversupply concerns, she added.
Mr Trump on Tuesday ordered a blockade of all sanctioned oil tankers entering and leaving Venezuela, putting oil flowing out of South American country at risk.
This came after US troops seized a “very large” oil tanker off the Venezuela coast last week as the Trump administration continues to put pressure on Venezuelan President Nicolas Maduro and his government.
The oil tanker, which had been under US sanctions for years, had been used to smuggle oil from Venezuela and Iran, according to US officials.
Venezuela produces 1.1 million barrels a day, with the oil mainly flowing to China and India, according to Rystad Energy analysis.
Although the volume is small in terms of global trade flows, representing about 1 per cent, but the quality is unique as more than 67 per cent of the output is heavy, it added.
“Benchmark crude oil prices could be impacted significantly by escalating military tensions between the US and Venezuela, with the Trump administration tightening pressure on Nicolas Maduro’s regime and signalling the possibility of a US incursion,” Rystad said.
But, despite Venezuela tensions, “oil markets remain weighed down by structural oversupply concerns”, Soojin Kim, a research analyst at MUFG Bank, said.
This was due to output increase from Opec+, tepid demand concerns and a potential Ukraine peace deal that could ease curbs on Russia crude “leaving prices on track for an annual decline”, she added.
Oil prices have been volatile this year with the Russia-Ukraine war and peace talks to end it. Mr Trump's tariffs and the decision by Opec+ to unwind production cuts has also affected prices.
Traders expect more oil to enter global markets next year as the producers' group boosts output amid lower demand.
Last month, Opec+ agreed to another output increase of 137,000 bpd for December. However, it paused production rises for the first quarter of next year.
