Oil Prices Climb as Sanctions Risk on Russia and Venezuela Raise Supply Concerns

BY COMFORT OGBONNA

Oil prices edged higher on Thursday as traders weighed the potential impact of fresh U.S. sanctions on Russian energy exports alongside growing uncertainty over Venezuelan oil supplies, adding to concerns about tightening global crude availability.

U.S. West Texas Intermediate crude gained 44 cents, or 0.79%, to trade at $56.38 per barrel by early Asian hours, trimming earlier gains after jumping more than $1 shortly after markets opened. Brent crude also advanced, rising 42 cents, or about 0.7%, to $60.10 per barrel, as investors reacted to escalating geopolitical risks in two major oil-producing nations.

Market sentiment was buoyed by reports that Washington is preparing another round of sanctions targeting Russia’s energy sector if Moscow refuses to accept a proposed peace deal with Ukraine. The measures under consideration are said to focus on Russia’s so-called shadow fleet of vessels that transport sanctioned crude, as well as traders and intermediaries involved in moving that oil across global markets. New restrictions could be announced as soon as this week, according to people familiar with the discussions.

Additional pressure came from concerns that tougher U.S. action against Russian oil would compound supply risks already heightened by Washington’s recent move to block sanctioned oil tankers traveling to and from Venezuela. Analysts said new curbs on Russian exports could have a more significant impact on global supply than the Venezuelan measures alone, given Russia’s larger role in the international energy market.

Despite expectations of ample supply later this year and Brent trading near $60 a barrel, analysts noted that the current price environment gives the U.S. room to pursue a more aggressive sanctions strategy without immediately triggering sharp price spikes.

Geopolitical tensions also remained elevated after Russian President Vladimir Putin warned that Moscow could seize additional Ukrainian territory by force if European countries failed to engage with U.S.-backed settlement proposals. Those remarks followed several days of talks that have yet to deliver meaningful progress toward ending the conflict.

Meanwhile, the blockade of Venezuelan oil tankers threatens roughly 600,000 barrels per day of exports, most of which are destined for China. However, around 160,000 barrels per day shipped to the United States are expected to continue, as vessels linked to Chevron are still operating under a prior authorization from the U.S. government. Most other Venezuelan exports were paused earlier in the week, though state oil company PDVSA has resumed loading some crude and fuel cargoes after resolving disruptions caused by a cyberattack.

Questions also remain about how a U.S. blockade would be enforced. The U.S. Coast Guard recently seized a Venezuelan oil tanker in an unprecedented move, and officials are said to be preparing for further interdictions if necessary.

Venezuelan crude accounts for roughly 1% of global oil supply, with China as its primary buyer. However, weak demand and large volumes of crude held in floating storage across Asia have so far limited the immediate impact on the world’s largest oil importer. Still, traders say the combination of potential sanctions on Russia and ongoing pressure on Venezuelan exports is enough to keep oil prices supported in the near term.