Crude oil prices jumped following US President Donald Trump’s announcement that he would impose 25% tariffs on Venezuela’s oil buyers. The West Texas Intermediate (WTI) futures at NYNEX rose 11% and the Brent futures at ICE were up 6.7% since their lows on 5 March.
US President Donald Trump posted on Truth Social that he would sign an executive order imposing 25% tariffs on countries that purchase Venezuelan oil and gas, effective from 2 April. He referred to this date as “Liberation Day in America”, as his long-threatened reciprocal tariffs are also set to take effect. The move is widely viewed as a political manoeuvre designed to put pressure on Venezuelan President Nicolás Maduro, as well as China, the largest importer of Venezuelan crude.
Oil prices surged following the announcement, with WTI futures at NYMEX climbing 1.22% to $69.11 per barrel, while Brent futures at ICE rose 1.16% to $73 per barrel on Monday. Both benchmarks hit their highest levels since 3 March, recording gains of 11% and 6.7%, respectively, despite a slight pullback during Tuesday’s Asian session.
Trump referred to the new oil duties as a “secondary tariff”, aimed at tackling illegal migration from Venezuela. “Venezuela has purposefully and deceitfully sent to the United States, undercover, tens of thousands of high-level and other criminals, many of whom are murderers and people of a very violent nature,” he claimed.
“Any country that purchases oil and/or gas from Venezuela will be forced to pay a tariff of 25% to the United States on any trade they do with our country,” he added. According to Reuters, the largest buyer of Venezuelan oil is China, followed by the US, India, Spain, Italy, and Cuba.
The tariff will also include countries that purchase Venezuela’s oil through third parties, effective on 2 April on top of existing tariffs. The new tariff will expire one year after the country last purchased Venezuela’s oil, according to Trump.
To mitigate the impact on US importers, the nation’s Treasury Department extended Chevron’s licence to produce oil in Venezuela until 27 May. Chevron, a major US oil producer, operates five onshore and offshore projects in Venezuela. Ahead of Chevron’s licence expiration, Venezuelan oil and gas exports have reached their highest levels since November. Previously, the US Treasury had urged Chevron to wind down operations in Venezuela by 3 April.
Oil prices rebound amid rising Middle East tensions
Crude prices have sharply rebounded from multi-year lows since early March, driven by escalating geopolitical tensions in the Middle East.
Last week, oil prices surged after US military strikes targeted Yemen’s Houthi group in the Red Sea, raising concerns over potential tighter sanctions on Iranian oil exports. Israel’s renewed military actions in Gaza further fuelled fears of a widening Middle East conflict. Additional sanctions on Iran and Venezuela could significantly impact global oil supply, as both countries’ exports have risen since 2022. According to the US Energy Information Administration (EIA), Iran holds 24% of the Middle East’s oil reserves and 12% of global reserves. Its oil exports have grown since 2022, following Russia’s invasion of Ukraine, with current output reaching 1.5 million barrels per day, or 1.4% of global production.
Meanwhile, the peace talks aiming to end the war in Ukraine still face roadblocks as Russia criticised the West for failing to lift sanctions on Russia’s exports of farm products. The lengthy negotiation process diminished expectations that the US would lift sanctions on Russia’s oil, which previously placed pressure on oil prices.
China’s stimulus measures fuel oil’s upside momentum
China’s pro-growth policy and positive economic data also improved the oil demand outlook in the country. The world’s largest oil importer proposed the introduction of further stimulus measures in the wake of Trump’s tariffs, adding to the oil market’s rebounding momentum. Beijing announced a special plan to boost domestic consumption last week, including measures to increase wages and support consumer spending. Meanwhile, China’s retail sales rose 4% in the first two months of this year, accelerating from a 3.7% increase in December. That was the fastest pickup since October last year.
