Trump orders blockade of sanctioned oil tankers entering, leaving Venezuela

Stateside on Tuesday, US President Donald Trump described the Venezuelan government as a “terrorist” organization and ordered a “total and complete” blockade of sanctioned oil tankers entering and exiting the country.

In an article published on Truth Social, “Venezuela is completely surrounded by the largest Armada ever assembled in the history of South America,” Trump said.

“Due to the theft of our assets and many other reasons, including Terrorism, Drug Trafficking, and Human Trafficking, the Venezuelan Regime has been designated a FOREIGN TERRORIST ORGANIZATION. Therefore, today, I am ordering a COMPLETE AND COMPLETE blockade of ALL SANCTIONED OIL TANKERS entering and leaving Venezuela.” he said.

He added: “This [the blockade] “It will grow even bigger and the shock they experience will be like nothing they have ever seen before – until all the Oil, Land and other Assets they previously stole from us are returned to the United States.”

According to the US State Department, designating an entity as a “Foreign Terrorist Organization” makes it illegal any U.S. citizen knowingly providing “material support or resources” to such an organization, among other measures.

Andy Lipow, president of Lipow Oil Associates, told CNBC that a full embargo on Venezuelan oil would affect 800,000 to 900,000 barrels of oil per day, which could increase prices by about $2 to $3 per barrel.

Lipow said this would still leave the world “well-supplied” as the global oil surplus is around 2 million barrels per day.

But Lipow said: “The oil market will be watching China’s reaction because they are the largest buyer of Venezuelan oil, enjoy discounted prices, and may be reluctant to comply with US sanctions, which could prevent Venezuelan oil from flowing into the market.”

While Brent crude oil increased by 0.9% to $59.46 per barrel after the news, US West Texas Intermediate crude oil increased by 1% to $55.82 per barrel after the news. Prices fell to a four-year low in the US on Tuesday; WTI fell almost 3% to $55.27 per barrel, while Brent lost 2.71%, or $1.64, to $58.92.

Lipow’s view was supported by Rapidan Energy Group chairman Bob McNally, who said “essentially nothing has changed” as long as only sanctioned tankers were targeted.

“We estimate that sanctioned (only) tankers will threaten approximately 0.3 million barrels of the approximately 0.9 million barrels of Venezuela’s total daily crude exports.”

That alone isn’t enough to ensure a sustained increase in crude oil prices, which have begun to fall as gluts emerge, McNally said.

The Trump administration has increased pressure on Venezuelan President Nicholas Maduro in recent months, saying his “days are numbered.” Interview with Politico. Trump did not categorically rule out a land invasion of the South American nation.

It has been reported that the White House has carried out a major military reinforcement in the Caribbean, deploying the largest aircraft carrier to the region, as well as carrying out attacks on boats that it claims are smuggling drugs to the USA.

— CNBC’s Lee Ying Shan contributed to this report.