Tensions between the US and Venezuela escalate, causing oil prices to rebound... WTI back to $56

NYMEX crude oil prices have maintained an upward trend for three consecutive trading days, regaining the $56 mark. Analysts believe this is mainly due to escalating diplomatic tensions between the US and Venezuela, with market concerns that oil supplies may be disrupted.

On the 19th local time, the January delivery West Texas Intermediate (WTI) crude oil traded on the New York Mercantile Exchange closed at $56.66 per barrel, up $0.51 (0.91%) from the previous trading day. WTI prices fell to $55.27 at the beginning of the week, hitting the lowest level since February 2021, but have now rebounded. However, on a weekly basis, it still declined by $0.78 (1.36%).

Recent oil price increases have been significantly influenced by geopolitical risks surrounding Venezuela. US President Trump stated in an NBC interview that a war with Venezuela is not out of the question, indicating a tough stance. Notably, the US government has designated the Maduro regime as a “foreign terrorist organization” and fully banned sanctioned oil tankers from using Caribbean and Eastern Pacific routes. Observers believe that the likelihood of reduced Venezuelan crude exports has increased.

US Secretary of State Pompeo also publicly supported President Trump’s pressure policy on Venezuela during a press conference. He emphasized that the current situation of the Venezuelan regime is unacceptable to the US. This is interpreted as one of the measures taken by the US government to further isolate Maduro’s regime, which it believes is linked to drug organizations. Since beginning his second term, President Trump has announced a full-scale war against drug cartels and continued to impose high-intensity sanctions.

Market analysts point out that concerns about such geopolitical risks potentially causing supply instability have led to a rebound in oil prices. LITBUSH colleagues, a US energy market consulting firm, commented in a report: “Oil prices are gradually recovering from early-week lows while paying attention to the Ukraine-Russia peace talks and new developments around Venezuela.”

This trend may further be influenced by whether further conflicts occur between the US and Venezuela. As one of the major oil producers that previously supplied heavy crude to the US market, if Venezuela’s supply lines are truly cut off, it is expected that international oil price volatility will increase further. Considering this, the oil market is likely to remain highly sensitive to changes in the situation.