Oil Moves on U.S.-Led Blockade Threat
Kevin Green
Sr. Markets CorrespondentWTI crude (/CL) has experienced sustained selling pressure over the past several months, driven by fears of a global supply glut and hopes that geopolitical tensions would ease. Along the way, prices broke through key areas of support, with WTI recently closing at its lowest level in over four years. Gasoline demand remains lackluster, and major consumers of petroleum products, most notably China, continue to struggle with economic growth. However, the market may be underpricing geopolitical risk, particularly in the form of potential near-term logistical disruptions.
That risk moved back into focus following President Trump’s announcement of a “total and complete” blockade of sanctioned Venezuelan oil tankers. While this development could place a short-term floor under oil prices, it is unlikely on its own to spark a sustained or massive rally. That said, it may represent the early stages of a broader shift in the outlook for the energy sector into 2026.
Venezuela currently exports approximately 750,000 to 950,000 barrels per day of crude oil, with more than 80% of those exports destined for China. Most of the remaining volumes are shipped to the United States, as Chevron (CVX) still maintains permitted operations in the country. For the week ending December 5th, the U.S. imported roughly 193,000 barrels per day of Venezuelan crude, while November imports averaged about 123,750 barrels per day.
If the proposed blockade is limited to sanctioned tankers, as initially suggested, the oil market would likely experience a short-term logistical disruption rather than a lasting supply shock. Over time, excess capacity from other producing countries could help offset any global supply losses, especially OPEC+ members whom claim to have additional capacity capabilities and the correct oil type to meet demand. However, there are two key considerations investors should keep in mind.
First, the most immediate impact would fall on China. There is little doubt that Beijing would strongly object to a U.S.-imposed blockade, and such a move could complicate or derail ongoing trade negotiations. Second, not all oil is created equal, particularly when it comes to Venezuelan crude.
The majority of Venezuela’s production consists of heavy sour crude, which is well suited for products such as diesel, fuel oil, and industrial inputs like asphalt and industrial grade plastics. However, this oil is extremely heavy and requires specialized refining equipment and sometimes additional additives, increasing processing costs. As a result, not every refinery can handle Venezuelan crude efficiently. China and Mexico have invested heavily in refining capacity tailored to this type of oil. While the United States does have some capability to process this type of heavy crude, its infrastructure is less robust than that of these other countries in some respects.
In the near term, the primary risk from further escalation is disruption to global oil flows and a rise in tanker rates worldwide. The longer-term risk lies in potential retaliation, with other countries potentially taking action against energy shipments elsewhere. One example would be Iran using its military influence to slow or disrupt tanker traffic through the Strait of Hormuz.
For now, oil prices are rallying, and further escalation could continue to provide a short-term bid. However, the longer-term implications remain uncertain, as political considerations would increasingly drive oil markets should tensions continue to intensify.
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