Market sentiment shifted dramatically within 24 hours. Just as oil prices plunged below a critical threshold, dampening bullish sentiment to a freezing point, Trump stepped in again!

At a pivotal moment, all eyes turned to Trump as tensions between the U.S. and Venezuela escalated, injecting fresh geopolitical risk premiums into oil prices. Around 7:40 AM Beijing time on Wednesday, Trump announced a comprehensive blockade of sanctioned oil tankers entering or leaving Venezuela, demanding the return of oil and other assets to the U.S. This news triggered an early rebound in crude prices, surging over $1 from intraday lows. Given Venezuela’s crude supply disruption risks—with China as its primary buyer and 60% of its heavy oil refined into asphalt—domestic asphalt futures surged 5% from the day’s low.

During European trading hours, reports emerged that the U.S. planned to impose sanctions on Russia to pressure Putin into accepting a Ukraine peace deal. Oil prices spiked $0.60 within two minutes, though gains were limited and later pared. The news highlighted persistent divisions in Russia-Ukraine negotiations, particularly between Europe and Russia. By 4 AM, reports suggested Trump might declare war on Venezuela by December 18 (Beijing time), pushing oil prices up nearly $1 post-close. Brent crude reclaimed $60, fully recovering the prior session’s losses.

While markets closely monitored potential U.S. military action against a major oil producer, Venezuela’s output (~1 million barrels per day) and exports (~700,000 bpd) suggest limited supply impact. The U.S. aims to reclaim its oil assets in Venezuela, and any conflict is expected to be short-lived. Thus, price gains may cap around $5, with $10 as an extreme case.

Wednesday’s EIA data showed a modest 1.27-million-barrel crude draw, far below API’s 9-million-barrel drop, while gasoline and diesel stocks rose, briefly weighing on prices. With supply-demand factors fading, geopolitical risks took center stage. Venezuela tensions and U.S.-Russia negotiations over Ukraine will dominate weekend focus. However, as we’ve noted, geopolitical shocks may fuel short-covering rallies but won’t reverse bearish supply glut expectations. Traders should watch for post-war reactions and consider selling into rallies.

**Daily Moves** - WTI rose 1.23% to $55.81/barrel; Brent gained 1.29% to $59.68. - INE crude edged up 0.73% to 427.4 yuan.

**Key Updates** 1. **OPEC+ vs. Exempt Producers**: Rystad Energy reports OPEC+ (led by Saudi Arabia and Russia) cut output by 5+ million bpd this decade to stabilize prices, while exempt members (Iran, Venezuela, Libya, Mexico) boosted supply by 2+ million bpd, diluting the cuts’ impact. OPEC+ output is set to rebound to 43.5 million bpd in Q4 2024, nearing Q1 2020 levels. - Iran drove most exempt growth (+1 million bpd), exporting heavily to China despite sanctions. Venezuela also crossed 1 million bpd for the first time since 2019. - Future exempt output may plateau as Iran faces renewed sanctions post-JCPOA collapse.

2. **U.S. Sanctions Threat on Russia**: The U.S. is preparing energy sector sanctions (e.g., targeting shadow fleet tankers) if Putin rejects a Ukraine peace deal. Measures could be announced this week.

3. **Trump’s Venezuela Blockade**: Trump declared a full embargo on sanctioned Venezuelan tankers, labeling Maduro’s regime a “foreign terrorist organization” and accusing it of funding crime via stolen oil assets. Chevron (CVX.N) reported unaffected operations in Venezuela. - U.S. naval forces are reportedly positioning for potential strikes, with electronic warfare aircraft already active off Venezuela’s coast.