Markets Rattled as U.S. Eyes Control of Venezuela’s Oil Industry

Oil prices weakened yesterday after President Trump said Venezuela would supply large volumes of sanctioned crude to the United States.

Energy

Developments in Venezuela remain in the spotlight, adding further downside pressure to oil prices. President Trump said Venezuela is prepared to sell up to 50 million barrels of sanctioned crude to the United States, a move that could also immediately weigh on Canadian crude exports to the U.S.

Such a deal would effectively open a release channel for Venezuelan oil, which has struggled to reach global markets due to a U.S. blockade on sanctioned tankers entering and leaving the country. Redirecting these barrels to the U.S. could ease storage constraints and reduce the need for Venezuela to curb production.

The U.S. Department of Energy confirmed that Venezuelan crude is already being marketed internationally, while Trump’s energy secretary stated that Washington intends to maintain long-term control over future Venezuelan oil sales. This strategy is reinforced by the continued tanker blockade, with two additional vessels reportedly seized yesterday.

Washington’s growing influence over Venezuela’s oil sector also raises uncertainty about the country’s future role within OPEC.

Meanwhile, Energy Information Administration (EIA) data showed U.S. crude inventories fell by 3.83 million barrels last week, the sharpest draw since late October. However, product balances were more bearish, as gasoline stocks rose by 7.7 million barrels and distillate inventories increased by 5.6 million barrels.

These inventory builds point to refinery utilization remaining firm, while implied demand for both products softened somewhat over the past week.

European gas prices moved higher yesterday, with TTF closing more than 2.5% up on the day. Colder conditions across parts of Europe, along with forecasts for below-average temperatures in the days ahead, are supporting the market. The current cold spell has also accelerated storage drawdowns, with EU gas inventories now at 58% of capacity, compared with a five-year average of 72%.

The latest positioning data show that investment funds cut their net short exposure in TTF for a third straight week. Funds purchased 6.2 TWh during the latest reporting period, reducing their net short position to 72.4 TWh.

Sources: ING Economic and Financial Analysis