Oil rebounded from multi-year lows on heightened tensions between US and Venezuela

Crude oil prices rebounded on Wednesday after sliding to four-and-a-half-year lows, as fresh geopolitical tensions reintroduced a risk premium into a market that had been dominated by oversupply concerns. Signals from the US of tougher measures against Russia, alongside a newly announced blockade on Venezuelan oil exports, helped arrest the recent sell-off.

Brent crude settled at $59.68 a barrel, up $0.76 or 1.3%, recovering part of the losses after breaking below the $60 threshold in the previous session. US benchmark WTI also advanced, closing at $55.94 a barrel, gaining $0.67 or 1.2%.

Market sentiment turned quickly as geopolitical developments overshadowed earlier optimism around peace negotiations in Eastern Europe. The US administration said it is considering sanctions targeting Russia’s so-called shadow fleet of tankers should peace proposals be rejected. 

At the same time, President Donald Trump announced a blockade of Venezuelan oil exports, claiming the country was “surrounded by the largest Armada ever assembled in the history of South America.”

The headlines triggered short-covering across oil markets, though upside momentum remained constrained by weak underlying fundamentals. Data from the US Energy Information Administration (EIA) showed a sharp build in refined product inventories, with gasoline stocks rising by 4.8 million barrels, more than twice market expectations, pointing to subdued domestic demand.

Analysts said that while geopolitical risks have provided near-term support, the broader outlook remains bearish. The potential impact of the Venezuelan blockade is seen as limited, given the country accounts for less than 1% of global supply, while the International Energy Agency continues to project a sizeable surplus in the global oil market over the coming year.

Written by: Aiman Haikal