(Bloomberg) — Oil rose from a four-and-a-half-year low after the US signaled tougher measures against Russia to spur a peace deal in Ukraine after declaring a blockade of Venezuelan oil exports.
West Texas Intermediate futures climbed as much as as 2.7% to almost $57 a barrel on Wednesday.
Most Read from Bloomberg
Washington is considering options such as targeting Russia’s so-called shadow fleet of oil tankers and traders who facilitate such exports, in case Vladimir Putin rejects a proposed agreement with Ukraine, people familiar said.
US President Donald Trump also said Venezuela is “completely surrounded by the largest Armada ever assembled in the History of South America” as he embarked on an effort to blockade the country’s sanctioned oil flows.
But while the escalation from Washington heightened risks, any impact on prices may be muted by an impending supply glut. Venezuela represents less than 1% of global crude supplies.
“Reaction has been muted, with the market viewing the impact at roughly 500,000 barrels a day — insufficient to shift the oversupply narrative,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth Group.
President Donald Trump said he was ordering a blockade of sanctioned oil tankers going into and leaving Venezuela, ratcheting up pressure on Caracas amid a US military buildup in the region and the threat of land strikes. Bloomberg’s Stephen Stapczynski reports.Source: Bloomberg
Oil remains on track for a yearly loss with supply expected to outpace demand both this year and next, primarily driven by OPEC+ returning idled output at a rapid rate and other producers pumping more. Signs of market weakness are emerging from the US to the Middle East, as investors brace for a surplus that the International Energy Agency predicts will be the biggest since the pandemic.
Traders mostly shrugged off a US government report on Wednesday showing rising domestic fuel inventories and a relatively small draw in crude stocks.
“The oil market has generally taken supply risks in its stride recently, given the scale of the surplus that is expected through 2026,” said Warren Patterson, Singapore-based head of commodities strategy at ING Groep NV.
Trend-following commodity advisers are still 100% short in both Brent and WTI, according to data from Bridgeton Research Group, which was acquired by Kpler this week. “While the market rallied earlier in the morning, CTAs will need further validation of the price move before adjusting their stop-loss limit orders,” according to the company.