Trump Tariff Threat Sparks Oil Price Rally

Oil extended its rally on Thursday after President Donald Trump warned of steep tariffs on countries importing oil from Venezuela. Brent crude rose for the fifth straight session, pushing past $73 a barrel.

The rebound adds more than 7% to prices from a three-year low reached earlier this month. The oil market reacted strongly as traders assessed the global implications of the new trade restriction.

Venezuela Crude in Focus Amid Tariff Tensions

Trump’s warning could reduce Venezuelan oil exports to key customers like China, India, Spain, and even the U.S. itself. Venezuela’s production accounted for about 1% of global oil output last year.

The South American nation mainly produces heavy, sour oil, which is vital for making diesel and fuel oil. A tightening supply of these heavier grades has driven them to trade at a premium to Brent.

Dollar Weakness Supports Oil Rally

A softer U.S. dollar also contributed to the price increase. Since oil is priced in dollars, a weaker greenback makes the commodity cheaper for international buyers, boosting demand.

This currency movement added momentum to the oil market’s recovery, further lifting prices across global benchmarks.

Volatility Lingers After Trade Measures

The global oil market remains volatile due to Trump’s broader trade agenda. Futures prices have fallen over 10% since peaking in mid-January, largely due to uncertainty stemming from tariffs and retaliatory moves.

However, recent stability in equity markets has helped oil prices rebound. U.S. crude futures are hovering near the $70 mark, a level not seen since the beginning of the month.

Supply Constraints May Support Summer Prices

Analysts expect tighter oil supplies to continue into summer. BNP Paribas strategist Aldo Spanjer said lower production from Venezuela and Iran could offset rising output from OPEC+.

“Refinery maintenance is winding down, and we’re still looking at a fairly strong physical market,” Spanjer wrote.

China’s Role in Venezuelan Oil Trade

Despite official sanctions, China has remained a key player in Venezuela’s oil trade. The world’s top importer resumed formal purchases in early 2024 after U.S. restrictions eased.

Traders note that Venezuela continued shipping oil to China unofficially for years, often disguised as bitumen mix to avoid detection.

This covert trade has supported Venezuela’s oil revenue despite sanctions, but Trump’s latest tariff threat could prompt new scrutiny.

Strategic Tensions Keep Oil Market Tight

Ongoing geopolitical tensions, from Venezuela to the Middle East, are keeping the oil market on edge. Trump’s new tariff move has added another layer of complexity, fueling uncertainty in trade flows.

As the summer demand season approaches, tighter supply of heavy crude and policy unpredictability may continue to support oil prices.