Oil prices rallied in Wednesday’s session, a day after U.S. President Donald Trump announced that any country that buys oil or gas from Venezuela will pay a 25% secondary tariff on trades with the United States. Trump claims that Venezuela has sent "tens of thousands" of people to the U.S. who have a "very violent nature." Brent crude for May delivery gained 1.2% to trade at $73.89 per barrel at 11.30 am ET while the comparable WTI crude contract climbed 1.2% to $69.84.
The secondary tariffs will target China, India, Spain, Italy and Cuba–all major buyers of Venezuelan oil. The tariffs could disrupt global oil supply chains, with U.S. oil companies likely to emerge as key beneficiaries of Venezuela’s customers looking for alternative supplies. Earlier this month, Chevron Corp. (NYSE:CVX) received a 30-day notice from the Trump administration to wrap up its operations in Venezuela. The deadline, set for April 3, provides the company only 30 days instead of the normal six-month wind-down period. Since 2022, Chevron has been allowed to operate in Venezuela as an exception to U.S. sanctions, exporting crude to the United States. According to Secretary of State Marco Rubio and other foreign-policy hawks, Chevron has been providing a financial lifeline for Maduro’s regime to enrich itself and suppress civil rights. Venezuela produced about 20% of Venezuela’s oil in 2024, close to Maduro’s goal of 1 million barrels per day. Chevron is the only major oil producer with a waiver to operate in Venezuela despite Washington’s sanctions against President Nicolás Maduro’s regime.
Venezuela's crude oil production has declined sharply from 3.2 million b/d in 2000 to 735,000 b/d in September 2023 mainly due to sanctions and poor maintenance.
Global Oil Demand Robust Despite Tariffs
Oil prices have held up surprisingly well over the past couple of weeks despite the presence of numerous headwinds that could have pushed Brent prices more decisively below $70/bbl. Indeed, front-month Brent has exceeded $70/bbl at some point on each of the past eight trading days. Speculative positioning, however, remains skewed to the short side of the market, particularly for gasoline and crude oil. Trader sentiment remains negative largely due to concerns over the potential demand effects of U.S. tariff policies and the potential supply effects of a U.S. switch to policies that are more accommodative of Russian targets.
Despite the prevailing bearish sentiment, Standard Chartered analysts argue that global oil demand remains strong, averaging 102.77 million barrels per day (mb/d) in January—a 2.19 mb/d year-on-year increase. The bank forecasts demand will surpass 105 mb/d by June and peak at 105.6 mb/d in August, with full-year growth projected at 1.41 mb/d. They also expect demand to outpace supply in Q2 and Q3. While U.S. tariff policy remains a key downside risk, current demand fundamentals appear solid, supporting a more bullish outlook than recent market sentiment suggests.
Standard Chartered sees a few reasons why oil prices haven't collapsed further in recent weeks. These include an oversold market, underpriced geopolitical risk, and a shift in trader sentiment away from excessive bearishness. Additionally, bullish inventory data reports and a weaker-than-expected U.S. shale supply outlook are lending support.
By Alex Kimani for Oilprice.com
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