Oil prices are currently holding at their highest levels in a month as the market anticipates a reduction in global supply due to the U.S. imposing tariffs on countries buying oil from Venezuela and restrictions on Iranian oil.
According to Reuters, Brent crude futures fell by 14 cents (0.2%) to $73.89 a barrel, while WTI futures decreased by 12 cents (0.2%) to $69.80.
However, these changes are minor compared to the over 2% increase both contracts saw this week. Overall, since early March, after hitting a multi-month low, prices have risen by more than 7%.
Analysts at BMI point out that the primary driver of this increase has been a shift in global oil sanction policies.
On Monday, U.S. President Donald Trump announced a 25% tariff on potential buyers of Venezuelan oil, following sanctions imposed on the import of Iranian oil to China.
This decision created uncertainty among buyers, leading to a halt in Venezuelan oil shipments to China, its largest consumer. Additionally, Indian company Reliance Industries, which owns the largest oil refinery in the world, plans to stop importing Venezuelan oil.
“The potential disappearance of Venezuelan supplies due to secondary sanctions, alongside the threat of similar restrictions on Iranian oil, has created a noticeable shortage in the market,” explained analyst June Go from Sparta Commodities.
The market has also been affected by rising demand in the U.S., the world's largest oil consumer. American crude oil inventories fell more than expected, with the Energy Information Administration (EIA) reporting a drop of 3.3 million barrels to 433.6 million barrels.
However, on a global scale, the oil market remains in a state of uncertainty. The active use of tariffs by the U.S. against its trading partners raises concerns about an economic downturn that could impact oil demand.
As a result, analysts do not expect prolonged increases in oil prices under the current conditions.
“Although the market is experiencing a period of heightened uncertainty, we maintain our forecast for the average Brent price at $76 per barrel in 2025, down from $80 per barrel in 2024,” analysts at BMI noted.
Reminder:
U.S. President Donald Trump stated that he will impose a 25% tariff on any country that buys oil and gas from Venezuela, citing migration and criminal gang issues in the U.S.