Oil prices climb as US court blocks Trump tariffs

Oil prices rose on Thursday, with Brent crude up 1.25% to $65.71 a barrel and WTI up 1.34% to $62.62, driven by a U.S. court blocking Trump-era tariffs and anticipation of OPEC+ discussions regarding increased July output. Market sentiment is also influenced by potential new U.S. sanctions on Russian crude and Chevron's termination of Venezuelan oil production, which collectively contribute to supply concerns amidst expectations of demand outpacing supply by 0.6-0.7 million bpd from May through August.

Analysis

Oil prices demonstrated upward momentum, with Brent crude futures advancing 1.25% to $65.71 per barrel and U.S. West Texas Intermediate (WTI) crude climbing 1.34% to $62.62 per barrel. This rally was partly attributed to a U.S. trade court ruling against across-the-board tariffs imposed by the Trump administration, which temporarily improved risk sentiment; however, analysts suggest this relief might be transient due to an anticipated appeal. Several supply-side factors are influencing the market: potential new U.S. sanctions targeting Russian crude flows, although analysts like Vivek Dhar from Commonwealth Bank of Australia express skepticism regarding their ability to significantly curtail Russia's oil exports; an impending OPEC+ decision expected on Saturday concerning the acceleration of oil production hikes in July; and Chevron's cessation of oil production in Venezuela, which previously amounted to 290,000 barrels per day (bpd), over a third of the nation's total output, following the revocation of its key license. Supporting a bullish outlook, Rystad Energy projects that global liquids demand will exceed supply by 0.6 to 0.7 million bpd from May through August. Market participants are also awaiting weekly inventory data from the American Petroleum Institute (API) and the Energy Information Administration (EIA), with preliminary API figures suggesting a decrease in U.S. crude and gasoline stocks, while a broader Reuters poll indicated a likely increase in crude and distillate inventories.

Key Decisions for Investors

• Investors should closely monitor the upcoming OPEC+ meeting, as a decision to significantly increase July production could temper the current bullish sentiment driven by supply concerns and robust demand forecasts.
• While the U.S. court ruling on tariffs and the disruption to Venezuelan supply offer near-term support for oil prices, it is prudent to remain watchful for the actual impact of any new sanctions on Russian oil and the definitive U.S. inventory data, which could introduce price volatility.
• For those holding or considering positions in Chevron (CVX), the termination of its Venezuelan operations, which removed 290,000 bpd from its production, warrants a careful assessment of the direct impact on the company's output and its strategic adjustments in the region.