Oil posted a third straight weekly gain as US tariffs on buyers of Venezuelan crude and restrictions on Iran’s oil trade stoked supply concerns.
Brent, the benchmark for two thirds of the world’s oil, closed 0.54 per cent lower at $73.63 a barrel on Friday. West Texas Intermediate, the gauge that tracks US crude, was down 0.8 per cent at $69.36 a barrel.
Crude futures have been highly volatile this year, with US President Donald Trump’s tariff policy raising concerns about an economic slowdown. Meanwhile, his administration has tightened sanctions on Iranian crude exports as part of its “maximum pressure” campaign against Tehran.
From April 2, the US will levy a 25 per cent tariff on all goods from any country that imports Venezuelan oil, whether directly from the country or indirectly through third parties.
The tariffs, with which the US want to “sever the financial lifelines of Venezuelan President Nicolas Maduro’s corrupt regime”, will lapse one year after a country stops importing Venezuelan oil, or sooner if officials deem it appropriate, the White House said in a statement on Tuesday.
China is both a major source of funding and the largest buyer of the country’s crude, accounting for more than 40 per cent of its oil exports. Other nations to be affected include India and Spain.
Throughout 2024 and into this year, the US has been purchasing Venezuelan oil through a licence granted to Chevron, allowing it to operate in the country despite sanctions.
On March 4, the US oil company was instructed by the Trump administration to cease operations in Venezuela within 30 days, but the deadline for the "wind down" period has now been extended to May 27, following the announcement of the tariffs.
If Chevron leaves, the country’s production could drop as low as 700,000 barrels per day by December this year, according to Rystad Energy.
“The tariffs will undoubtedly have a significant impact on the country’s oil production,” the consultancy said in a research note this week. “However, the impact on supply and demand balances will be muted, as China’s imports of Venezuelan crude has been much lower in the first two months of 2025."
The tariff move indicates the White House's willingness to sacrifice low oil prices to achieve wider strategic objectives, isolating Iran and Venezuela and increasing pressure on China, said Ole Hansen, head of commodity strategy at Saxo Bank.
The Trump administration has also been gradually increasing pressure on Iran, with two new rounds of oil-related sanctions announced this month.
Iran, which produces about 3.3 million bpd of crude, exports 1.5 million bpd mostly to small, independent oil refineries in China, known as “teapot” refineries.
“It is our view that the Trump administration is currently taking a relatively light touch to the Iranian oil sector, in order to leave the door open on nuclear negotiations,” BMI, a Fitch Solutions company, said in a research note on Thursday.
“However, if these negotiations do not progress, we can expect to see far more aggressive tactics deployed, posing significant downside risk to Iran’s oil exports."