Oil prices rose more than one per cent on Wednesday after US President Donald Trump ordered a "total and complete" blockade of all sanctioned oil tankers entering and leaving Venezuela, raising fresh geopolitical tensions at a time of concerns over demand.
Brent crude futures were up 87 cents, or 1.5 per cent, at $59.79 a barrel at 07:30 GMT, while US West Texas Intermediate crude rose 85 cents, or 1.5 per cent, to $56.12 a barrel.
Oil prices settled near five-year lows in the previous session on progress in Russia-Ukraine peace talks, as a deal may see Western sanctions on Moscow eased, freeing up supply even as the market grapples with fragile global demand.
Trump on Tuesday ordered a blockade of all sanctioned oil tankers entering and leaving Venezuela, adding that he now regarded the nation's rulers as a foreign terrorist organisation.
However, crude oil traders in Asia said a recovery in futures buying, after prices dipped below $60 per barrel the previous day, was also a key driver of the uptick in oil on Wednesday.
"The price is sentiment-driven by the Venezuelan news for today, but overall, export volumes from Venezuela are relatively small in the global supply share. With all eyes on the Russia-Ukraine discussions, the market is still under downside risk," a trader said.
Another trader said the price uptick is unlikely to last, adding that, "it might be good opportunity for some to build short positions."
Trump's latest comments came a week after the US seized a sanctioned oil tanker off the coast of Venezuela.
It is unclear how many tankers would be affected and how the US will impose the blockade against the sanctioned vessels, and whether Trump will turn to the coast guard to interdict vessels like he did last week. In recent months, the US has moved warships into the region.
While many vessels picking up oil in Venezuela are under sanctions, others transporting the country's oil and crude from Iran and Russia have not been sanctioned. Tankers chartered by Chevron are also carrying Venezuelan crude to the US under an authorisation previously granted by Washington.
"Venezuelan oil production accounts for around one per cent of global output, but supplies are concentrated among a small group of buyers, mainly Chinese teapot refiners, the US, and Cuba," said Muyu Xu, senior oil analyst at Kpler.
"Ample supply in the sanctioned oil market is expected to cap any notable upside in Venezuelan crude prices in China, despite anticipated shipment disruptions," said Xu.
China is the biggest buyer of Venezuelan crude, which accounts for roughly four per cent of its imports.
"In the short term, an extreme price rally is unlikely unless there are any retaliatory actions that impact the wider Americas region's oil and gas systems," said Emril Jamil, a senior oil analyst at LSEG.
(Reporting by Jeslyn Lerh and Siyi Liu in Singapore; Additional reporting by Katya Golubkova and Yuka Obayashi in Tokyo, Shariq Khan in New York; Editing by Jacqueline Wong and Shri Navaratnam)
