Morning Highlights: Oil Falls as Trump Announces $2B Venezuela Import Deal

Wednesday, January 7, 2026

________________________________________

MARKET SNAPSHOT

Oil tumbled as Trump announced a deal to import up to $2 billion worth of Venezuelan crude, adding supply to an already oversupplied market. Brent crude fell $0.16 to $60.54/bbl, while WTI dropped $0.27 to $56.86/bbl as of 7:00 AM EST. Both benchmarks extended declines of over $1 from the previous session.

The deal flips the Venezuela narrative from supply disruption to supply addition, with Trump planning to refine and sell up to 50 million barrels of crude stuck under the U.S. blockade as a first step in reviving the sector.

________________________________________

TOP DEVELOPMENTS

Trump's Venezuela Oil Deal: "Money Will Be Controlled By Me"

The Agreement: The U.S. will import up to $2 billion worth of Venezuelan crude, with Trump stating he plans to refine and sell up to 50 million barrels currently stuck under blockade.

"This Oil will be sold at its Market Price, and that money will be controlled by me, as President of the United States of America, to ensure it is used to benefit the people of Venezuela and the United States!" Trump posted Tuesday.

Immediate Impact: The deal could initially require cargoes bound for Venezuela's top buyer China to be rerouted as Caracas seeks to unload millions of barrels stranded in tankers and storage. Sources at state oil company PDVSA told Reuters negotiations for an export deal had progressed, though Venezuela's government made no official announcement.

Working With Socialist Allies: Trump appears to be calculating it's better for stability to work with Maduro's senior allies for now, with interim President Delcy Rodriguez treading a fine line between denouncing Maduro's "kidnapping" and kick-starting cooperation under explicit U.S. threats.

The U.S. is prioritizing oil sector revival with help from U.S. firms over freeing political prisoners or democratic transition. Officials warned Venezuelan leaders they must cooperate or risk sharing Maduro's fate, with particular scrutiny on hardline Interior Minister Diosdado Cabello, who controls security forces.

Maduro's Status: The 63-year-old leader, who ruled since Hugo Chavez's 2013 death, pleaded not guilty Monday to narcotics charges in Manhattan court, shackled at ankles and wearing orange and beige prison garb.

Operation Details: U.S. Special Forces swooped into Caracas by helicopter Saturday under darkness, smashing Maduro's security cordon and seizing him at a safe room door with no U.S. casualties. Venezuela hasn't confirmed total losses, though the army posted a list of 23 dead and Cuba said 32 members of its military and intelligence services died.

________________________________________

CHINA DENOUNCES U.S. AS BULLY, SHIFTS TO IRAN AND RUSSIA

Beijing's Response: "The United States' brazen use of force against Venezuela and its demand for 'America First' when Venezuela disposes of its own oil resources are typical acts of bullying," Chinese foreign ministry spokesperson Mao Ning said. "These actions seriously violate international law, gravely infringe upon Venezuela's sovereignty, and severely damage the rights of the Venezuelan people."

Supply Shift: China imported 389,000 bpd of Venezuelan oil in 2025, representing about 4% of seaborne crude imports. Beijing may now turn more to Iran and Russia, traders said.

China, Russia, and leftist Venezuelan allies have all denounced the raid to capture Maduro, Washington's biggest Latin American intervention since the 1989 Panama invasion to topple Manuel Noriega. Washington's allies are also deeply uneasy at the extraordinary precedent of seizing a foreign head of state, with Trump making threats of more action from Mexico to Greenland.

Pressure Campaign: The U.S. is also pressuring Venezuela to expel official advisers from China, Russia, Cuba, and Iran, the New York Times reported. Russia has deployed a submarine and other vessels to escort an empty, aging oil tanker trying to evade the U.S. blockade near Venezuela, the Wall Street Journal reported.

________________________________________

CHINESE TEAPOTS SHIFT TO IRANIAN, RUSSIAN HEAVY CRUDE

Venezuelan Supply Curtailed: Chinese independent refiners are expected to switch to heavy crude from Iran and other sources in coming months to replace Venezuelan shipments halted since Maduro's removal, traders and analysts said.

"The Venezuela drama hits China's independent refineries the hardest, as they may lose access to the discounted heavy barrels," said Sparta Commodities' June Goh. "However as there are ample Russian and Iranian feedstocks available and Venezuelan barrels on water, we do not foresee the teapots needing to bid up for unsanctioned barrels as the economics would likely not make sense for them."

Current Situation:

• At least a dozen sanctioned vessels that loaded in December departed Venezuelan waters in early January carrying some 12 million barrels of crude and fuel

• Loadings for Asia at Venezuela's main ports have stopped since January 1, shipping data showed

• Venezuelan crude aboard ships in Asia remains sufficient to cover roughly 75 days of Chinese demand, limiting immediate upside for alternatives, said Kpler's Xu Muyu

Price Impact: With supply tightening, sellers of Venezuelan Merey crude for prompt delivery offered cargoes at discounts of about $10-$11/bbl to ICE Brent versus $15 last month, though trade has come to a standstill.

Alternative Sources: Teapots using Venezuelan oil are likely to switch to Russian and Iranian supply in March and April. China can also tap non-sanctioned sources like Canada, Brazil, Iraq, and Colombia.

Iranian Heavy crude is priced at about $10/bbl discount to ICE Brent in ample supply, the cheapest alternative. Teapots may also consider Middle Eastern grades like Iraqi Basrah. Canadian crude discounts for Cold Lake and Access Western Blend have widened over $2 this week to $4-$5/bbl to ICE Brent for April delivery to China on expectations of lower U.S. demand.

________________________________________

VENEZUELAN OPPOSITION KEPT WAITING

Main anti-Maduro figure Maria Corina Machado, who won the Nobel Peace Prize in October, wants to return home where she says the opposition would easily win a free vote. However, she's taking care not to antagonize Trump, saying she'd like to personally give him the Nobel prize which he coveted and which she dedicated to him.

Banned from running in 2024, Machado's ally Edmundo Gonzalez won overwhelmingly according to the opposition, U.S., and election observers. Trump is stressing oil sector revival over democratic transition for now.

________________________________________

BOTTOM LINE

The Venezuela situation has flipped from bullish supply disruption to bearish supply addition in less than a week. Trump's announcement that the U.S. will import up to $2 billion of Venezuelan crude and sell 50 million barrels stuck under blockade adds supply to an already oversupplied market, triggering today's selloff. The broader geopolitical implications are staggering: the U.S. conducted its biggest Latin American intervention since 1989, seized a sitting head of state (killing 55+ Venezuelan and Cuban personnel), and is now working with his Socialist allies while threatening them with his fate if they don't cooperate. China's denunciation as "bullying" and shift toward Iranian and Russian crude creates a reconfiguration of global oil trade flows. However, the market impact is clearly bearish as ample alternative supplies (Russian, Iranian, floating Venezuelan barrels covering 75 days of Chinese demand) prevent any price spike. Chinese teapots can easily shift to $10/bbl discounted Iranian Heavy or other alternatives. Brent breaking below $61 and WTI falling under $57 suggests the market is trading the supply addition, not the geopolitical drama. The $60-65 range everyone predicted for 2026 is already testing the lower bound in the first week of January. With 50 million barrels of Venezuelan crude potentially hitting the market, Indian Russian crude demand collapsing below 1 million bpd, and ample global supply, the path of least resistance is clearly lower. Watch for OPEC+ response and whether the group considers emergency cuts, though their track record suggests tolerance for prices in the high $50s before action.