Oil Sheds War Premium as Geopolitics Shift; US Eyes Venezuelan Supply

Global crude benchmarks have retreated significantly, with Brent Crude sliding toward $66.30, as the risk premium associated with Middle East tensions rapidly evaporates. The market focus is shifting from immediate supply shocks to a managed rebalancing of global inventory.

Geopolitical De-escalation

The primary driver of the sell-off is the cooling of US-Iran rhetoric. Following reports that Tehran is seeking a diplomatic framework and denying military drills in the Strait of Hormuz, traders have unwound long positions built on fears of a supply blockade. The upcoming talks in Istanbul are viewed as a potential further sedative for the market.

The Venezuela Factor

Adding to the bearish sentiment is the strategic pivot by the US regarding Venezuela. Following the January military operation, the planned entry of US oil majors (Chevron, ExxonMobil) into Venezuela—under strict US “management”—suggests a potential medium-term increase in supply.

• Infrastructure Reality: While the political path is clearing, analysts warn that Venezuela's degraded infrastructure means any significant output boost will take months, if not years.
• Market Sentiment: Nevertheless, the perception of incoming supply is currently enough to cap upside momentum.

Technical Outlook

Commerzbank notes that CTA funds have suffered their longest losing streak in history on oil due to these false breakouts. With MACD indicators showing neutral-to-weak momentum, WTI and Brent remain vulnerable to further downside unless OPEC+ intervenes or demand data (like the recent strong US ISM Manufacturing print) provides a floor.