- Brent, WTI trading near three-week highs
- Trump press on Venezuelan, Iranian oil fans bullish sentiment
- Russia, Ukraine agree to sea, energy truce
- Coming up: US EIA data on crude inventories at 1030 EDT
(Reuters) – Oil prices edged higher on Wednesday as concerns about tighter global supply grew following the U.S. threat of tariffs on nations buying Venezuelan crude, along with a larger-than-expected drop in U.S. crude inventories.
Brent crude futures gained 49 cents, or 0.67%, to $73.51 a barrel by 0950 GMT, while U.S. West Texas Intermediate crude futures rose 48 cents, or 0.70%, to $69.48 a barrel.
Both contracts hit their highest in three weeks in the previous session.
Trade of Venezuelan oil to top buyer China stalled on Tuesday after U.S. President Donald Trump’s order threatening tariffs on countries buying from Caracas created fresh uncertainty, days after U.S. sanctions targeting China’s imports from Iran.
On Monday Trump signed an executive order authorizing his administration to impose blanket 25% tariffs under the 1977 International Emergency Economic Powers Act on imports from any country that buys Venezuelan crude oil and liquid fuels.
Oil is Venezuela’s main export and China is already a target of U.S. import tariffs.
Chinese traders and refiners said they were waiting to see how the order would be implemented and whether Beijing would direct them to stop buying.
“Physical markets are tightening as flows are shifted due to the raft of U.S. sanctions, with the latest development in this unfolding trade war seeing President Trump declare a plan to hit buyers of Venezuelan crude with 25% tariffs –this will particularly impact buyers in China, India and Western Europe,” said Ashley Kelty, analyst at Panmure Liberum.
Last week, Washington also imposed a new round of sanctions on Iran’s oil sales targeting entities including Shouguang Luqing Petrochemical, a “teapot,” or independent refinery in east China’s Shandong province, and vessels that supplied oil to such plants in China, the top buyers of Iranian crude as well.
“Believe that Saudi Arabia will take advantage of U.S. pressure on Iran to increase their production to backfill lost Iranian flows,” Panmure Liberum’s Kelty added.
The market was also buoyed by American Petroleum Institute data that showed U.S. crude inventories fell by 4.6 million barrels last week, a sign of healthy demand for fuel in the world’s largest economy.
Analysts polled by Reuters were expecting a decline of 1 million barrels.
Official U.S. government data on crude inventories is due on Wednesday.
Capping oil prices, the U.S. reached deals with Ukraine and Russia to pause attacks at sea and against energy targets, with Washington agreeing to push to lift some sanctions against Moscow.
Kyiv and Moscow both said they would rely on Washington to enforce the deals, while expressing scepticism that the other side would abide by them.
The upswing in oil prices is a temporary phenomenon, with the potential economic slowdown due to Trump’s tariffs keeping a lid on price gains, said Priyanka Sachdeva, a senior market analyst at Phillip Nova.
Reporting by Arunima Kumar in Bengaluru, Stephanie Kelly in New York and Siyi Liu in Singapore; Editing by Sonali Paul and Kim Coghill
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