Trump orders blockade of Venezuelan oil tankers: Oil prices jump; supply risks rise

Oil prices rose sharply on Wednesday after US President Donald Trump ordered "a total and complete" blockade of all sanctioned oil tankers entering and leaving Venezuela, stoking fresh geopolitical tensions at a time when markets are already wary about weak global demand.

Brent crude futures climbed 57 cents, or 0.9%, to $59.50 a barrel by 0135 GMT, while US West Texas Intermediate (WTI) crude gained 59 cents, or 1%, to $55.86 a barrel.


The rebound came a day after oil prices settled near five-year lows, pressured by progress in Russia-Ukraine peace talks. A potential deal could lead to easing of Western sanctions on Moscow, increasing supply in an already well-supplied market.

Earlier on Tuesday, Trump ordered a blockade of sanctioned oil tankers linked to Venezuela and said he now regarded the country’s rulers as a foreign terrorist organisation.

The move could disrupt about 0.4–0.5 million barrels per day of supply and lift prices by $1–2 per barrel, according to a US oil trader.

"In regard to pricing impacts, we should see the prompt physical premiums reacting more than flat price, especially natural Merey replacements in the Gulf Coast like Canadian and Colombian Castilla blends, though the total loss of supply would be less than 200,000 barrels per day for the Chevron equity cargoes," Matias Togni, analyst at oil market insights firm Next Barrel, told Reuters.

Another analysts said that the oil market is currently well supplied, but warned that if the blockade remains in place for an extended period, crude prices could move higher.

It remains unclear how the US will enforce the blockade or whether it will deploy the Coast Guard, as it did last week. In recent months, Washington has moved warships into the region.

Trump’s latest move follows the US seizure of a sanctioned oil tanker off Venezuela’s coast last week, stepping up pressure on the government of President Nicolas Maduro, whom Trump has accused of allowing drugs to enter the US.

Since the seizure, Venezuela’s crude exports have fallen sharply. While many tankers lifting oil from the country are under sanctions, others transporting Venezuelan crude, as well as oil from Iran and Russia, remain unsanctioned. Tankers chartered by Chevron are also shipping Venezuelan crude to the US under a prior authorisation from Washington.