Oil prices climb as US court blocks Trump tariffs

Oil prices increased following a U.S. court ruling that blocked President Trump's tariffs, boosting market risk appetite, with Brent crude futures up 1.25% to $65.71 a barrel and WTI up 1.34% to $62.62 a barrel; however, the U.S. administration is expected to appeal. The market is also monitoring potential U.S. sanctions on Russian crude and a possible OPEC+ decision to increase output in July, while Chevron terminated oil production in Venezuela after its license was revoked, removing 290,000 bpd from the market.

Analysis

Oil prices exhibited upward momentum, with Brent crude futures rising 1.25% to $65.71 a barrel and U.S. West Texas Intermediate (WTI) crude increasing 1.34% to $62.62 a barrel. This appreciation is primarily attributed to a U.S. court ruling that blocked President Trump's tariffs, which temporarily boosted market risk appetite, although analysts caution this relief could be transient due to an anticipated appeal by the U.S. administration. The market is concurrently assessing several critical supply-side factors: the potential for new U.S. sanctions targeting Russian crude flows, an upcoming OPEC+ decision regarding a possible acceleration of output hikes in July, and the cessation of Chevron's (CVX) oil production in Venezuela. Chevron's termination, following the revocation of its U.S. license, removes approximately 290,000 barrels per day of Venezuelan oil from the market. While new sanctions on Russia are a concern, some analysts, like Vivek Dhar from Commonwealth Bank of Australia, express skepticism about their potential to significantly curtail Russian oil exports. Adding to a bullish outlook, Rystad Energy forecasts that liquids demand will outpace supply by 0.6 to 0.7 million bpd from May through August. Investors are also anticipating weekly U.S. inventory data from the American Petroleum Institute (API) and the Energy Information Administration (EIA), with preliminary API figures suggesting a decrease in crude and gasoline stocks and an increase in distillate inventories last week.

Key Decisions for Investors

• Acknowledge the current bullish drivers for oil prices, including the temporary tariff suspension and specific supply curtailments like Chevron's Venezuelan exit, but prepare for potential volatility stemming from the tariff ruling's appeal and the OPEC+ meeting outcomes.
• Closely monitor developments concerning U.S. sanctions on Russian oil and the details of any OPEC+ agreement to adjust production, as these will be significant price catalysts.
• Pay keen attention to the forthcoming API and EIA weekly inventory reports for near-term directional cues, particularly given the mixed preliminary signals on product stockpiles.
• For investors holding Chevron (CVX), the termination of its Venezuelan operations presents a negative specific impact, removing a notable portion of its production, which should be weighed against the broader supportive environment for oil prices.