Oil rises 1% as Trump plans tariff on countries that buy Venezuelan oil, gas

By Arathy Somasekhar

HOUSTON, March 24 (Reuters) - Oil prices gained 1% on Monday as U.S. President Donald Trump said he will impose a 25% tariff on countries that buy oil and gas from Venezuela.

Price gains were capped, however, as the U.S. gave oil producer Chevron until May 27 to wind down its oil operations and exports from Venezuela. Trump had initially given Chevron 30 days from March 4 to wind down that license.

The two moves taken together alleviate some pressure on Chevron while putting more pressure on other consumers of Venezuelan oil, though it is uncertain how the Trump administration will enforce the tariff.

Brent crude futures LCOc1 rose 84 cents, or 1.2%, to $73 a barrel, while U.S. West Texas Intermediate crude CLc1 was up 83 cents, or 1.2%, at $69.11.

Also keeping a ceiling on prices, OPEC+' will likely proceed with a planned May oil output hike, sources said, while talks continued to end the war in Ukraine, which could increase supply of Russian crude to global markets.

"We've got a little bit of a supply shock of Venezuela losing barrels to the world market. So that's definitely a bullish force," said Dennis Kissler, senior vice president of trading at BOK Financial, adding that investors were watching for tighter restrictions on Iran as well.

The U.S. on Thursday issued new sanctions intended to hit Iranian oil exports, including what the State Department said were the first U.S. measures targeting a Chinese "teapot refinery" processing the crude.

Both benchmarks settled higher on Friday and recorded a second consecutive weekly gain. Wall Street also surged on Monday after signs the Trump administration is taking a measured approach on tariffs against its trading partners.

Trump signalled on Friday that there will be flexibility on tariffs and that his top trade chief plans to speak with his Chinese counterpart. He said on Monday he will in the very near future announce tariffs on automobiles, aluminium and pharmaceuticals.

He also urged the Federal Reserve to lower interest rates after the U.S. central bank last week kept them unchanged. Lower rates decrease the costs of borrowing, and can boost economic activity and demand for oil.

Atlanta Federal Reserve President Raphael Bostic said he anticipates slower progress on inflation in coming months and as a result now sees the Fed cutting its benchmark interest rate only a quarter of a percentage point by the end of this year.

U.S. and Russian officials were in Saudi Arabia on Monday for talks over a broad ceasefire in Ukraine, with Washington also targeting a separate Black Sea maritime ceasefire deal while a wider agreement is thrashed out.

"The fear of more Russian barrels returning to the world market is probably one of the biggest negatives that we've seen," Kissler added.

OPEC+, a group that includes OPEC and allied producers led by Russia, will likely stick to its plan to raise oil output for a second consecutive month in May, three sources told Reuters, amid steady oil prices and plans to force some members to reduce pumping to compensate for past overproduction.

The group, which pumps over 40% of the world's oil, is scheduled to raise output by 135,000 barrels per day in May.

OPEC+ has been cutting output by 5.85 million bpd, equal to about 5.7% of global supply, in a series of steps since 2022 to support the market.