| Commoditiy | Price | Weekly Change | 50day-Ave | 100day-Ave | 200day-Ave |
|---|---|---|---|---|---|
| Brent ($/b) | 60.10 | -0.54 | 62.82 | 64.49 | 66.06 |
| US WTI ($/b) | 56.66 | -0.08 | 58.88 | 60.59 | 62.80 |
| ICE Gasoil ($/MT) | 610.00 | -9.75 | 686.20 | 684.04 | 671.75 |
| Jet CIF NWE ($/MT) | 654.04 | -14.51 | 718.56 | 717.49 | 705.11 |
The Venezuela situation has been a key story for the oil market over the Christmas period. On Saturday, following news of military action and the capture of Venezuela’s leader Maduro and his wife, Trump held a press conference in which he talked about transition of power to someone that would not repeat Maduro’s policies. The Vice President Delcy Rodríguez naturally succeeds Maduro and has now done so. Rodríguez was initially critical about what the US has done and defended Maduro, while Trump said he did not think the opposition leader Maria Corina Machado would not be the right person. Initially this suggested there could be a high degree of uncertainty as to how a transition of power which is acceptable to the US might happen. Since then, Rodríguez has talked about “collaborating” with the US and Trump has said that she will pay a high price if she does not do what’s right, suggesting that he seems content with her as a leader.
Before Christmas tension was building in the region, with the US confiscation of a Venezuelan tanker and build up of US forces around the Venezuelan coast. Brent bounced back above 60 \$/b after dipping below shortly before this took place. Brent then peaked over the period at just under 63 \$/b before softening once again. This morning, Brent did open higher at over 61 \$/b but fell below 60 \$/b as the market has digested news of the apparent de-escalation.
Looking forward to how this might impact the oil market the question is how significant Venezuela is as an oil producer and its potential to increase output. According to the IEA report covering November, it produced 860 kb/d accounting for around 0.8% of world demand. In 2015 it produced 2.5 mb/d or 2.7% of world demand at that time. Production declined over the last 10 years due to a lack of investment as a result of economic crisis and sanctions that increased following the 2018 presidential election. Venezuela does have the potential to increase production in the future, but that will be a long term project requiring sustained and significant investment that will take time to bear fruits.
In the near term the impact of the situation in Venezuela is limited because its output is modest and its oil is sanctioned and off limits to most refineries. If the transition of power does work for the US and the current blockade of Venezuela’s oil output and sanctions are lifted, its output would be attractive to US refiners as the heavy Venezuelan crude would complement the light domestic production from US shale. An increase in non-sanctioned supply could be negative for benchmarks like Brent and US WTI. Brent broke 60 \$/b again this morning, the next level to look out for is the pre-Christmas low of 58.72 \$/b which is close to the 2025 low of 58.40 \$/b.
No representation or warranty, express or implied, is or will be made and no responsibility or liability is or will be accepted by Investec or its Affiliates in relation to the accuracy, reliability, suitability or completeness of any information contained in this document and any such liability is expressly disclaimed. This document does not purport to be all inclusive or to contain all the information that you may need. Investec gives no undertaking to provide the recipient with access to any additional information or to update this document or any additional information, or to correct any inaccuracies in it which may become apparent.
This document does not take into account the specific investment objectives, financial circumstances or particular needs of any recipient and it should not be regarded as a substitute for the exercise of the recipient’s own judgement and due diligence. Investec does not offer investment advice or make any investment recommendations. Recipients of this document should seek independent financial advice regarding the appropriateness or otherwise of investing in any investment strategies discussed or recommended in this document and should understand that past performance is not a guide to future performance, and the value of any investments may fall as well as rise.
Investec expressly reserves the right, without giving reasons therefore, at any time and in any respect, to amend or terminate discussions with the recipient of this document without prior notice and hereby expressly disclaims any liability for any losses, costs or expenses incurred by such recipient.
