Market News

(Bloomberg) -- Oil recovered from its lowest close in almost half a decade, as the US prepares new measures against Russia if Moscow rejects a peace deal, and blockades sanctioned tankers off Venezuela.

Brent futures climbed as much as 2.5% above $60 a barrel. Washington is considering options such as targeting Russia’s so-called shadow fleet of oil tankers and traders who facilitate its exports, in case President Vladimir Putin rejects a proposed agreement with Ukraine, highlighting the risk that a deal to end the conflict is far from complete.

President Donald Trump also said Venezuela is “completely surrounded by the largest Armada ever assembled in the History of South America” as he embarked on an effort to blockade the country’s sanctioned oil flows.

But while the escalation from Washington reinjected an element of geopolitical risk, any impact on a market headed for a glut will likely be marginal, with Venezuela’s production currently representing less than 1% of global supplies.

The series of sanctions against Russia haven’t changed Putin’s calculus so far, nor have they significantly reduced exports, but the Kremlin said sanctions are harmful for the rebuilding of relations with the US.

Oil remains on track for a yearly loss with supply expected to outpace demand both this year and next, primarily driven by OPEC+ returning idled output at a rapid rate and other producers pumping more. Signs of market weakness are emerging from the US to the Middle East, as investors brace for a surplus that the International Energy Agency predicts will be the biggest since the pandemic.

“The oil market has generally taken supply risks in its stride recently, given the scale of the surplus that is expected through 2026,” said Warren Patterson, Singapore-based head of commodities strategy at ING Groep NV.

Venezuela’s oil production has increased since hitting a low in 2020, but is far from where it was decades ago. Tankers loaded almost 590,000 barrels a day for export last month, compared with global consumption of more than 100 million barrels a day. Most of the country’s crude goes to China.

The OPEC producer’s flagship Merey crude is often used to make bitumen to pave roads in China. Bitumen futures in Shanghai surged from the lowest level in four years on Wednesday for their biggest gain since June.