Published on: 2026-01-05
Oil prices often skyrocket when geopolitical tensions arise. This time, the opposite happened. After Venezuela's weekend shock triggered a brief spike in volatility, WTI crude futures (CL) slipped back toward $57 and Brent (LCO) faded near $60, as traders framed the news as a longer-term supply risk rather than an immediate disruption.
That reaction looks odd until you separate the two timelines.
The short timeline concerns the potential disruption of Venezuelan barrels in the coming weeks.
The long timeline is about whether Venezuela could produce more in 2026 and beyond if the politics and sanctions regime change.
Currently, the oil market is heavily focused on the long timeline because the broader backdrop is already leaning bearish. That sets up a potential "year of the glut," with investors watching for inventory builds after crude fell nearly 20% in 2025.
| Benchmark | Level during the Monday session | Day move context |
|---|---|---|
| Brent | Around $60.26–$60.54 | Prices were lower despite the headlines. |
| WTI | Around $56.79–$57.04 | Prices were lower after early swings. |
Early trading was volatile, but the session finished with a calmer, slightly softer tone, suggesting the initial swings faded into more balanced (or mildly defensive) positioning by the close.
The key point is not the exact cent value. The key point is that the market did not attach a large fear premium to the news.
The main reason oil did not spike is that traders quickly asked a blunt question: Does this event remove barrels, or does it unlock barrels?
For context, the United States captured Venezuelan President Nicolás Maduro, and President Trump said Washington would take control of the country while keeping an embargo in place.
Venezuela also has a fact that always pulls prices in two directions: it holds the world's largest proven oil reserves at about 303 billion barrels, but its industry is damaged and underinvested.
Thus, the market's initial reaction was not "war premium," but rather "future supply flexibility."
Analysts argued that a political transition could raise Venezuelan output meaningfully, but not overnight.
JPMorgan's analysts said production could rise to about 1.3–1.4 million bpd within two years, and potentially higher over the longer term.
Goldman Sachs kept its 2026 price forecasts (Brent $56, WTI $52) and noted that a bigger Venezuelan recovery would take investment, but could still weigh on longer-run pricing if output eventually reached around 2 million bpd.
This is why the headline "Venezuela crisis" did not automatically become "oil spike." The market looked beyond the next week and started discounting a world with more supply.
This is the second pillar of the "no spike" story.
Venezuela's oil output has been described as around 800,000–900,000 bpd in recent analyst notes, although reports in November suggest about 1.1 million bpd, which shows the number varies by definition and timing.
Even at the higher end, that is still a small slice of a global market producing roughly 100+ million bpd, where OPEC+ alone accounts for about half of the world's supply.
Analysts also stated the U.S. strikes did not damage Venezuela's oil industry infrastructure.
When infrastructure is intact, traders tend to treat disruption risk as temporary and reversible.
Furthermore, more than 80% of the country's exports are usually aimed at China, and one analyst suggested that China has developed significant reserves, which lowers the likelihood that a disruption in Venezuela would cause a worldwide rush.
The United States has been tightening enforcement pressure. On December 31, 2025, the U.S. Treasury announced that it imposed sanctions on companies and pinpointed tankers linked to sanctions evasion within Venezuela's oil industry.
That matters because enforcement pressure was already in the price. The market was not starting from a relaxed sanctions baseline.
For context, PDVSA began cutting crude production because the country is running out of storage capacity, as a U.S. blockade reduced exports to zero, and PDVSA had already started using ships for floating storage.
Concrete figures include:
Venezuela exported about 950,000 bpd in November.
Shipments dropped to around 500,000 bpd in December based on preliminary numbers tied to ship movements.
More than 17 million barrels were sitting in ships waiting to depart, while onshore storage was filling.
Those are meaningful numbers for Venezuela's economy. They are not big enough to overwhelm a global market that is already worried about oversupply.
| Scenario | Net global impact | Why it did not trigger a spike |
|---|---|---|
| Venezuela loses 0.5 million bpd for 1 month | -0.5 million bpd temporarily | The market is already focused on 2026 oversupply and spare capacity. |
| Venezuela loses 1.0 million bpd for 1 month | -1.0 million bpd temporarily | That still sits below estimated OPEC spare capacity of about 5.3 million bpd. |
| Venezuela adds 0.4 million bpd over 18–24 months | +0.4 million bpd structurally | That is the "future supply" story that pulls prices down today. |
This table is a planning tool, not a forecast. The point is scale.
Oil did not spike because traders were already anchored to a bearish baseline.
The U.S. Energy Information Administration stated global oil inventories are expected to keep building through 2026, an overhang it sees putting downward pressure on prices.
They also projected Brent to average about $55 in Q1 2026 and hover near that level for the rest of the year.
The International Energy Agency projected that in 2026, the supply would exceed demand by approximately 3.85 million barrels per day, an unusually large surplus in the crude market.
When traders think the market is already long barrels, geopolitical headlines typically need to take a meaningful amount of supply offline to drive a sustained price move.
OPEC+ resolved to keep production steady and had earlier agreed to suspend output increases until March 2026, with the following meeting set for February 1, 2026.
That posture matters because it signals the group is watching price weakness and is not forced into a reactive increase.
| Indicator / Level | Latest value | Signal / comment |
|---|---|---|
| WTI (CL) last | $56.87 | Price is pressing the lower end of the recent range after failing to hold rebounds. |
| WTI 50-day MA (simple) | $57.43 | Price is below the 50-day MA, which keeps short-term trend pressure intact. |
| WTI 200-day MA (simple) | $57.82 | The 200-day MA is overhead resistance and a common “trend reset” line. |
| WTI RSI (14) | 37.597 | Weak momentum, close to "washed-out" territory, but not a reversal by itself. |
| WTI MACD (12,26) | -0.17 | Bearish momentum remains in control on the cited daily reading. |
| WTI ATR (14) | 0.2664 | Volatility is present but not extreme, which fits a grind-lower market. |
| Brent (LCO) last | $60.15 | Brent is holding a premium over WTI, but the trend is still soft. |
| Brent 50-day MA (simple) | $60.89 | Price below the 50-day MA suggests rallies can stall quickly. |
| Brent 200-day MA (simple) | $61.38 | A reclaim would improve trend tone, but it is not in place yet. |
| Brent RSI (14) | 33.042 | Momentum is weaker than WTI on the cited read, reflecting heavier selling pressure. |
| Brent MACD (12,26) | -0.17 | Bearish momentum on the cited daily reading. |
| Brent ATR (14) | 0.265 | Similar volatility profile to WTI, which supports range trading tactics. |
WTI is operating beneath its 50-day and 200-day moving averages based on the mentioned daily data, and the indicator dashboard overall suggests a "Strong Sell."
Brent exhibits a similar trend, as the price remains beneath its 50-day and 200-day moving averages, while momentum indicators continue to indicate a downward direction.
In simple terms, the market is not paying for rallies. Rallies are being used to reduce risk, not to build it.
Forecasts from the EIA and IEA indicate a market where supply is not scarce, and inventories are still rising.
That macro posture usually caps sustained bull trends unless demand surprises sharply higher or an outage becomes unavoidably large.
These levels blend pivots, moving averages, and psychologically important round numbers.
WTI:
$56.66–$56.55: Classic S1–S2 pivot zone on the cited daily table.
$55.00 area: Psychological support, also near the lower end of the cited 52-week range.
Brent:
$60.11–$60.00: Classic S1–S2 pivot zone on the cited daily table.
$59.00 area: A natural round-number magnet if selling accelerates.
WTI:
$57.43–$57.82: 50-day and 200-day moving averages cluster, which often acts as the first "sell-the-rally" zone.
$60.00: A larger psychological level that would signal a sentiment shift if reclaimed and held.
Brent:
$60.89–$61.38: 50-day and 200-day moving averages cluster.
$65.00: A higher psychological level that is likely to require a demand surprise or a major outage.
WTI: A sustained daily close above the 200-day MA near $57.82 weakens the bearish structure.
Brent: A sustained daily close above the 200-day MA near $61.38 improves the trend picture.
U.S. sanctions and enforcement clarity
Physical export flow data
Inventory and balance headlines
Macro demand tone
Oil fell because traders judged that global supplies were ample and that the news could eventually lead to higher Venezuelan production, which is bearish for future balance.
Not usually. Venezuela's production base is far below historic peaks, and recent estimates in reporting place it well under levels that would dominate global balances.
The glut narrative is the belief that the 2026 supply will exceed demand by a wide margin, which reduces the impact of single-country disruptions.
In conclusion, oil didn't spike due to the new geopolitical tension because the market doesn't appear to be short of barrels. Instead, Venezuela's headline shock landed in a market that is already fixated on inventory builds, muted demand growth, and the idea that future Venezuela barrels could add to supply rather than remove it.
Technically, both WTI (CL) and Brent (LCO) remain below key moving averages, and momentum indicators remain bearish on the cited daily readings. That keeps rallies suspect unless price can reclaim the 200-day moving average and hold it.
The practical approach is to stay level-driven. Watch the $55 area in WTI and the $60 area in Brent for downside tests, and watch the moving-average clusters overhead for signs that sellers are losing control.
Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
