Oil Prices Rebound After Trump's Escalation Against Venezuela

SadaNews - Oil prices have risen from their lowest level since 2021, following U.S. President Donald Trump's escalation of pressure on Venezuela by issuing an order to impose a blockade on sanctioned oil tankers off the coast of the South American nation.

Brent crude surged above $59 per barrel after losing more than 5% during the previous four sessions, amid fears of a widening global supply surplus. West Texas Intermediate crude was trading near $56.

U.S. Escalation Against Maduro's Regime

Trump stated in a social media post on Tuesday that he ordered a blockade on crude oil tankers entering and leaving Venezuela.

This move represents a significant escalation and follows the U.S. military's seizure of an oil tanker off the coast of Venezuela last week. Trump also announced he decided to designate the regime of Venezuelan President Nicolás Maduro as a "foreign terrorist organization."

Venezuela's oil production had increased since hitting its lowest levels in 2020, but it still remains far from the levels recorded decades ago.

Shipments loaded on tankers for export were about 590,000 barrels per day last month, compared to a global consumption of more than 100 million barrels per day. Most of Venezuela's crude exports are sent to China.

Prolonged Crisis Might Drive China to Seek Alternatives

The quantities of Venezuelan oil stored on tankers across Asia could mitigate the immediate impact on buyers in China, but any long-term disruption in exports could drive refineries to seek higher-cost alternatives.

According to Rapidan Energy Group, about 30% of shipments are at risk if the U.S. escalates hostilities.

Warren Patterson, head of commodity strategy at ING Group based in Singapore, said: "The oil market has recently dealt with supply risks calmly, given the scale of the expected surplus until 2026." He added: "With prices rising by less than 1% currently, it is clear that the market is not too concerned."

Supply Surplus Forecasts Pressure Annual Outlook

Oil is still on track for an annual loss due to expectations of a supply surplus after OPEC+ increased production rapidly, alongside rising output from other producers amid weak demand.

Signs of weakness are emerging in the market from the U.S. to the Middle East, as investors brace for a surplus expected to be the largest since the COVID-19 pandemic, according to the International Energy Agency.

At the same time, traders are assessing the prospects for a potential peace agreement in Ukraine, which could pave the way for easing restrictions on Russian oil exports.