Oil prices rebounded from their lowest close in nearly half a decade, as the US prepared new measures against Russia if Moscow rejects a peace deal and blocks sanctioned tankers off the coast of Venezuela.

Brent futures rose as much as 2.5% to above $60 per barrel. Washington is considering options such as targeting a so-called shadow fleet of Russian oil tankers and the traders who facilitate their exports, if President Vladimir Putin rejects a proposed deal with Ukraine, highlighting the risk that a deal to end the conflict is far from over.

President Donald Trump also said Venezuela is "completely surrounded by the largest fleet ever assembled in the history of South America" ​​as he launched efforts to block the flow of the sanctioned country's oil.

However, while Washington's escalation has once again injected an element of geopolitical risk, any impact on a market headed toward oversupply is likely to be marginal, with Venezuelan production currently representing less than 1% of global supply.

A series of sanctions against Russia have so far not changed Putin's calculations, nor have they significantly reduced exports, but the Kremlin says they are hurting efforts to rebuild relations with the US.

Oil prices remain on track for an annual decline, with supply expected to exceed demand both this year and next, driven primarily by OPEC+ rapidly resuming stalled production and other producers pumping more. Signs of market weakness are emerging from the US to the Middle East, as investors brace for a surplus predicted by the International Energy Agency to be the largest since the pandemic.

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

Venezuelan oil production has increased since hitting a low in 2020, but remains far from the levels of decades past. Tankers loaded nearly 590,000 barrels per day for export last month, compared with global consumption of more than 100 million barrels per day. Most of the country's crude is exported to China.

Merey crude, a mainstay of OPEC producers, is often used to make bitumen for road paving in China. Bitumen futures prices in Shanghai surged from a four-year low on Wednesday, posting their biggest gain since June.

Brent for February delivery rose 2.1% to $60.14 a barrel at 11:15 a.m. in London. WTI for January delivery rose 2.2% to $56.49 a barrel. (alg)

Source: Bloomberg.com