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Oil prices continued their upward momentum on Tuesday, extending gains from the previous session following U.S. President Donald Trump’s decision to impose 25% tariffs on countries buying oil and gas from Venezuela.
Key Price Movements:
- Brent crude (May contract) rose 0.5% to $72.76 per barrel.
- West Texas Intermediate (WTI) crude climbed 0.6% to $69.52 per barrel.
- Both benchmarks gained over 1% in the previous session on speculation of a more targeted U.S. trade tariff approach next month.
Factors Driving Oil Prices:
1. U.S. Tariffs on Venezuelan Oil Buyers Create Supply Concerns
- President Trump’s 25% tariff on countries importing Venezuelan oil, effective April 2, is aimed at pressuring the Maduro administration.
- Venezuela, which produced 918,000 barrels per day (b/d) in February, exports around 750,000 b/d, with China being its largest buyer (55% of exports).
- Analysts warn that this move could significantly tighten global oil supply, impacting overall market balance.
2. OPEC+ Sticking to Output Increase Plan
- OPEC+ plans to increase oil production by 135,000 b/d in May, following an earlier rise in April.
- However, seven OPEC+ members will continue additional production cuts (189,000 to 435,000 b/d) until June 2026, balancing supply levels.
- These offsetting measures aim to stabilize oil markets amid geopolitical uncertainties.
3. Russia-Ukraine Peace Talks and Oil Market Impact
- U.S.-mediated talks between Russia and Ukraine could lead to increased Russian oil supply, pressuring prices.
- Negotiations on a potential Black Sea ceasefire could impact maritime oil shipments, potentially shifting global oil trade dynamics.
Market Outlook:
- The Venezuelan tariff decision could add upward pressure on oil prices if it significantly reduces available supply.
- OPEC+ balancing efforts remain a key factor in market stability despite scheduled output hikes.
- Developments in U.S.-Russia-Ukraine peace talks could influence oil market direction, depending on potential supply shifts.
