Venezuela blockade could cause $5-7 increase in oil prices if enforced: Analyst

Group 1 - The US President has ordered a blockade on all sanctioned oil tankers entering and exiting Venezuela, labeling the Venezuelan regime as a foreign terrorist organization [1] - Venezuela is already producing significantly below one million barrels per day, with most crude being sold at a deep discount to China, indicating that a blockade may not drastically reduce global oil supply [2][8] - Experts suggest that a full embargo could potentially remove between 800,000 to 900,000 barrels from the market, which might lead to a price increase of $2 to $3 in a worst-case scenario [2][5] Group 2 - The current oil prices are at their lowest since February 2021, influenced by oversupply concerns and geopolitical factors, including a potential peace plan between Russia and Ukraine [3] - Venezuela accounts for about 2% of global oil exports, and any significant reduction in exports could materially affect oil prices due to the marginal pricing mechanism [6] - The enforcement of sanctions may only impact a portion of Venezuelan oil supplies, particularly those already sanctioned and primarily exported to China, potentially affecting around 400,000 barrels per day [9][11] Group 3 - The situation remains uncertain as there has been no concrete action taken yet, and the actual impact will depend on the US government's follow-through on Trump's statements [7][10] - The oil market is currently experiencing oversupply, which is contributing to the weakness in oil prices, with estimates of oversupply ranging from one million to four million barrels per day [14] - OPEC may respond to the US blockade by potentially cutting production in the future, as historical actions have been influenced by both market conditions and geopolitical factors [15][17]