By Antonio Di Giacomo, Senior Market Analyst at XS.com
Crude oil prices resumed their downward trend midweek, reflecting heightened geopolitical and strategic uncertainty. The market reacted cautiously to U.S.
President Donald Trump’s plan to refine and market Venezuelan crude, an initiative that has reignited debate over control of energy flows and its impact on the global supply–demand balance.
In this context, U.S. crude West Texas Intermediate (WTI) has fallen more than 5.0% since January 6, 2026, sliding to the $55.90 per barrel area, while Brent has declined by more than 3.9%, trading around $59.80 per barrel. These moves highlight a market susceptible to any signal that could disrupt supply chains, especially at a time when geopolitics is once again playing a central role in price formation.
Washington’s proposal raises questions about the potential impact of a reconfiguration of Venezuelan exports. Venezuela holds the world’s largest proven oil reserves, but its output remains constrained by sanctions, lack of investment, and deteriorating infrastructure. The possibility that part of its crude could be redirected or processed under U.S. supervision creates uncertainty about the actual volumes that would reach international markets.
Trade tensions also played a significant role in pressuring prices. China, one of the main buyers of Venezuelan crude, opposed U.S. intervention after reports that Washington had persuaded Caracas to divert part of its shipments away from Beijing. In 2025, China’s imports of Venezuelan oil were around 389,000 barrels per day, so any disruption to that flow has direct implications for Asia’s energy balance.
Adding to this backdrop was the U.S. seizure of a Russian-flagged tanker linked to Venezuelan operations. This move reinforced perceptions that Washington is seeking to exert more direct influence over crude flows in the Americas, increasing political risk and the uncertainty premium that investors typically factor into crude oil prices.
From a broader perspective, the crude oil market is in a fragile phase, shaped by slowing global growth, cautious demand, and the strategic decisions of major players. Despite production cuts and adjustments by traditional producers, the market continues to react more to geopolitical headlines than to strictly technical fundamentals.
In the short term, volatility is likely to remain elevated. Traders are assessing whether Venezuelan supply will ultimately be constrained, redirected, or relabeled under new commercial arrangements, while closely monitoring China’s response and any further U.S. moves on energy and trade policy.
In conclusion, the recent pullback in crude oil reflects a market dominated by uncertainty and geopolitics rather than immediate structural changes in supply and demand. The situation in Venezuela, tensions between the United States and China, and direct intervention in crude flows create a complex backdrop in which prices could remain under pressure and prone to bouts of high volatility.
In this environment, crude oil continues to act as a sensitive barometer of balance, or imbalance, in the global economic and political landscape.
Photo by Jan-Rune Smenes Reite:
