Oil prices rebounded on Wednesday as markets weighed an escalation in US action against Venezuela against persistent bearish pressures from Russia-Ukraine peace talks and weak Chinese economic data.
On Wednesday, oil prices rose more than 2.4 per cent after US President Donald Trump ordered what he described as a “total and complete blockade” of all sanctioned tankers entering and leaving Venezuela, heightening fears of supply disruptions from the South American producer.
As of noon on Wednesday, US West Texas Intermediate crude jumped 2.44 per cent to $56.62 a barrel, while Brent crude climbed 2.27 per cent to $60.26 a barrel, according to Oilprice.com.
In a post on Truth Social, Trump labelled the Venezuelan government a “foreign terrorist organisation”, justifying the move as part of efforts to combat alleged illicit activities tied to President Nicolás Maduro’s administration, including drug smuggling and human trafficking. He further claimed that the “largest armada ever assembled in the history of South America” would continue to expand until Venezuela returns oil, land and assets he alleged belong to the United States.
While the blockade targets only sanctioned vessels within Venezuela’s long-standing “shadow fleet”, analysts said it could still disrupt a substantial portion of the country’s estimated 850,000 barrels per day in crude exports, most of which go to China.
Chevron’s licensed operations shipping Venezuelan crude to the United States are expected to remain unaffected for now.
The rally followed a sharp decline earlier in the week, when crude prices slipped below $60 a barrel on Tuesday, hitting their lowest levels since May, as optimism over a possible Russia-Ukraine peace deal and weak Chinese economic data weighed heavily on market sentiment.
According to Reuters, Brent crude futures fell $1.03, or about 1.7 per cent, to $59.53 a barrel on Tuesday, while WTI crude dropped $1.06, or 1.9 per cent, to $55.76 a barrel.
The United States reportedly offered NATO-style security guarantees for Kyiv, while European negotiators said progress had been made in talks, fuelling optimism that an end to the war could be closer.
Russia, however, said it was unwilling to make any territorial concessions, according to state news agency TASS.
Market structure also reflected bearish sentiment, with the six-month Brent futures spread moving into contango for the first time since October. Barclays analysts expect Brent to average $65 a barrel in 2026, slightly above the forward curve, citing an already priced-in surplus of 1.9 million barrels per day.
Additional pressure came from China, where fresh economic data showed factory output growth slowing to a 15-month low, while retail sales posted their weakest growth since December 2022. IG market analyst Tony Sycamore told Reuters that the data reinforced concerns that global demand may struggle to absorb recent supply growth.
Although fears of oversupply were partly offset by the US seizure of a sanctioned Venezuelan tanker last week, traders noted that ample floating storage and a surge in Chinese purchases of Venezuelan crude ahead of potential sanctions limited the immediate market impact.
Despite Wednesday’s rebound, analysts said broader bearish sentiment remains dominant, and without further concrete action beyond Trump’s latest rhetoric, a sustained oil price rally may remain elusive.
