Good morning! Let’s focus on the international oil market.

The U.S. Treasury Department announced new sanctions against Venezuela on December 11, targeting three nephews of Venezuelan President Nicolás Maduro and another individual. Additionally, six companies accused of transporting Venezuelan oil and six vessels involved in such shipments were also sanctioned. Analysts suggest these measures aim to block the sanctioned parties from accessing U.S. property or financial assets and prohibit U.S. firms and citizens from engaging in business with them. Violations could result in penalties or enforcement actions against banks and financial institutions. The move is seen as part of U.S. President Donald Trump’s efforts to intensify pressure on Venezuela.

**Geopolitical Risks Escalate: Will They Support Oil Prices?** The global crude market is caught in a complex tug-of-war between bullish and bearish forces. On one hand, the OPEC+ alliance, led by Saudi Arabia and Russia, has signaled a strategic contraction by suspending its planned production increase for Q1 2026. On the other hand, geopolitical "black swans" are flapping their wings in the Americas—recently, the U.S. military intercepted and seized a sanctioned oil tanker near Venezuela’s coast. These seemingly contradictory developments raise a critical question: Can tightening supply and sudden geopolitical risks dispel the current oversupply gloom in the oil market?

Regarding OPEC+’s decision to pause production hikes, Zhao Ruochen, a crude oil researcher at Galaxy Futures, noted that global crude inventories remain high, making it difficult to alter oversupply expectations in the short term. With non-OPEC+ producers (especially the U.S.) maintaining robust output, OPEC+’s ability to balance the market through production adjustments is diminishing in both effectiveness and marginal impact.

Meanwhile, reports of Russia’s November crude output falling significantly below its OPEC+ quota have drawn attention. He Haoyun, a senior researcher at CITIC Futures, attributed this to increased Ukrainian drone attacks on Russian energy infrastructure and its "shadow fleet," temporarily disrupting exports. However, early December data showed a rebound, suggesting no major supply cuts yet. This implies Russia’s output fluctuations stem from short-term geopolitical disruptions and logistical challenges rather than long-term capacity declines. Zhao Ruochen added that the impact of Western sanctions and infrastructure attacks—whether temporary or lasting—remains uncertain. While Russia’s supply uncertainties offer a slight bullish narrative, their sustainability is questionable.

The recent U.S. seizure of a sanctioned Venezuelan tanker marks a shift from "paper enforcement" to "military enforcement," according to Zhao Ruochen. This could heighten transport risks and insurance costs for shadow fleets, potentially disrupting Venezuela’s crude exports and boosting heavy crude premiums in the short term. He Haoyun warned that expanded U.S. actions might further hinder Venezuela’s exports to other markets. Additionally, U.S. maritime blockades could complicate Venezuela’s access to materials needed for oil production, leading to involuntary output declines. While escalating U.S.-Venezuela tensions may provide some price support, actual supply reductions and potential diplomatic deals with Maduro’s government warrant caution.

Despite geopolitical risks offering intermittent support, analysts emphasize that oil prices’ medium-to-long-term trajectory hinges on supply-demand fundamentals. He Haoyun pointed out that while OPEC+’s production freeze and slower non-OPEC+ growth may help, Q1’s seasonal demand weakness keeps the market oversupplied. Without substantial supply cuts, prices may remain weak and volatile. Zhao Ruochen cited forecasts predicting peak global crude inventory builds in Q1 2026, with daily surpluses of 2–4 million barrels—the primary bearish factor.

Both analysts highlighted other variables. He Haoyun suggested evolving geopolitics and domestic procurement demand could offer temporary price support, while Zhao Ruochen stressed market focus on potential Russia-Ukraine de-escalation, which could pressure prices downward. Notably, fresh Middle East conflicts could quickly inject geopolitical premiums into crude markets.