Oil prices rose on Wednesday as supply concerns grew following a bigger-than-expected drop in U.S. crude inventories and additional limits on Venezuelan and Iranian oil exports.
As of 6:35 GMT, Brent crude futures gained 0.30 percent to $73.24 per barrel, while U.S. West Texas Intermediate crude futures rose 0.35 percent to $69.24 a barrel. Both contracts hit their highest in three weeks in the previous session.
In the past week, the U.S. administration tightened sanctions on the Iranian oil trading network, and this was followed by President Trump declaring that the U.S. will enforce a 25 percent tariff on any nation importing Venezuelan crude.
Tariffs on Venezuelan oil importers boost crude market
On Monday, Trump signed an executive order authorizing his administration to impose blanket 25 percent tariffs under the 1977 International Emergency Economic Powers Act on imports from any country that buys Venezuelan crude oil and liquid fuels. Oil is Venezuela’s main export. China, already a target of U.S. import tariffs, is its largest buyer.
“This action indicates a definite change, potentially signalling the White House’s willingness to sacrifice low oil prices to achieve wider strategic objectives—isolating Iran and Venezuela and increasing pressure on China,” stated Ole Hansen, head of commodity strategy, Saxo Bank.
The trade of Venezuelan oil to China halted on Tuesday as Chinese traders and refiners said they were waiting to see how the order would be implemented and whether Beijing would direct them to stop buying.
“With U.S. sanctions back in focus, it is worth noting that Iran and Venezuela have increased their crude oil production by 1.6 million barrels per day over the past four years. Meanwhile, other OPEC+ members, particularly in the GCC, have reduced output to maintain stable and high prices. As a result, Iran and Venezuela’s market share has risen from 11 percent to 16 percent,” added Hansen.
U.S. crude inventories fall by 4.6 million barrels
Last week, Washington also imposed a new round of sanctions on Iran’s oil sales, targeting entities including Shouguang Luqing Petrochemical, an independent refinery in east China’s Shandong province, and vessels that supplied oil to such plants in China, the top buyers of Iranian crude.
Oil prices were also supported by American Petroleum Institute data that showed U.S. crude inventories fell by 4.6 million barrels last week, a sign of healthy demand for fuel in the world’s largest economy. Official U.S. government data on crude inventories is due on Wednesday.
“Brent crude’s current momentum has taken prices to a three-week high, with the latest move being supported by a combination of underinvested hedge funds, improved risk sentiment following a softening in the tone regarding tariffs after Trump indicated some nations could receive breaks from “reciprocal” tariffs starting next week on 2 April, and not least, the mentioned secondary tariffs on buyers of Venezuelan crude, which, together with Iran sanctions, may help tighten supply,” added Hansen.
Further limiting the rise in oil prices was the Ukraine-Russia deal to pause attacks at sea and against energy targets, with Washington agreeing to push to lift some sanctions against Moscow. Kyiv and Moscow both said they would rely on Washington to enforce the deals while expressing skepticism that the other side would abide by them.
