Morning Highlights: Oil Plunges Over 4% as Trump Says Iran Killings Ending

Thursday, January 15, 2026

________________________________________

MARKET SNAPSHOT

Oil tumbled as Trump said Iran assured him it would stop killing protesters, eliminating the immediate risk of U.S. military action. Brent crude fell $2.50 (3.7%) to $64.02/bbl, while WTI dropped $2.34 (3.75%) to $59.68/bbl as of 6:00 AM EST.

Brent rose above $66.50 Wednesday before giving back most gains after Trump's remarks reduced expectations of potential U.S. strikes on Iran. "The immediate risk premium had softened but is unlikely to go away," said Saxo Bank's Ole Hansen.

________________________________________

TOP DEVELOPMENTS

Iran Risk Premium Evaporates

Trump said he had been assured Iran would stop killing protesters, tempering concerns over military action and potential supply disruptions. The U.S. is withdrawing some personnel from Middle East military bases, a U.S. official said Wednesday, after a senior Iranian official said Tehran would hit American bases if Washington strikes.

This follows Trump's Monday threat of 25% tariffs on any country doing business with Iran and warnings of possible military intervention. The rapid de-escalation removes the $3-4/bbl geopolitical premium Barclays estimated earlier this week, validating the market's "show me" stance on actual disruptions.

________________________________________

U.S. INVENTORY BUILD ADDS PRESSURE

U.S. crude and gasoline inventories rose last week by more than analysts estimated, the EIA said Wednesday. "The EIA reported the biggest U.S. crude stocks build since November, lifted by imports hitting a 14-month high, adding relative downward pressure on WTI versus Brent," Hansen added.

Record import levels and inventory builds reinforce the bearish fundamental narrative of oversupply that Goldman highlighted in their $54 Brent Q4 2026 forecast.

________________________________________

The US has officially started selling Venezuelan oil.

First Sale Complete: The U.S. sold the first cargo of Venezuelan crude received after Maduro's ousting, fetching $500 million, an unnamed Washington official told CNN. More sales are expected in coming days.

Trump said earlier this month Venezuela would "turn over" between 30-50 million barrels to the U.S. Reuters quoted the official saying proceeds went into bank accounts under U.S. government control, with at least one account in Qatar, considered a neutral location "where funds can move with U.S. approval and without risk of seizure."

The Race for Deals: Commodity traders including Chevron, Vitol, and Trafigura are seeking to expand their fleets to handle as large a portion of the 30-50 million barrels as possible.

Logistical Nightmare: Crude exports could eventually approach the roughly 500,000 bpd Venezuela shipped to the U.S. before sanctions, but sources warned first shipments will come from oil in storage accumulated to date. This could take three to four months and involves clearing bottlenecks at Jose terminal, where storage capacity is limited.

Operational Challenges:

• Years of sanctions left Venezuela storing crude in aging, poorly maintained tankers and nearly full onshore tanks

• Many vessels holding oil are under sanctions and cannot be directly accessed due to insurance and liability restrictions, even with U.S. licenses

• Onshore storage facilities in disrepair, raising safety and operational risks

Ship-to-Ship Solutions: Shipping firms including Maersk Tankers and American Eagle Tankers are examining ways to expand ship-to-ship transfer operations off Venezuela. One option replicates logistics previously used in Amuay Bay, involving transfers between storage vessels, piers, and export tankers. However, operations face constraints including limited availability of smaller feeder ships, competition for loading slots, and poorly maintained port equipment.

AET, which already supports Chevron's Venezuelan crude exports, has been approached by potential clients seeking expanded transfer capacity. Transfers through nearby waters like Aruba and Curaçao remain possible but costlier than direct loadings.

________________________________________

VENEZUELA REVERSES PRODUCTION CUTS, EXPORTS RESUME

Venezuela has begun reversing oil production cuts made under U.S. embargo, with crude exports also resuming, three sources said.

Long-Term Production Outlook: Enverus predicted this week that Venezuela's oil production could expand to 1.5 million bpd by 2035, representing a 50% increase on current production rates. Under Enverus's best-case scenario, output could hit 3 million bpd in 2035, though this depends on global demand and supply balances.

Bottom Line: The combination of immediate supply additions (30-50 million barrels in storage being sold, first $500M cargo already moved) and longer-term production recovery (potentially 1.5-3 million bpd by 2035) represents significant bearish pressure. The 3-4 month timeline for clearing storage through complex ship-to-ship transfers means these barrels will hit the market gradually through Q1-Q2 2026.

________________________________________

DEMAND PICTURE: CONFLICTING SIGNALS

OPEC Optimistic: OPEC said Wednesday that 2027 oil demand will likely rise at a similar pace to this year and published data indicating near balance between supply and demand in 2026, contrasting with other forecasts of a glut.

China Imports Strong: China's crude imports in December rose 17% year-over-year, while total 2025 imports were up 4.4%, government data showed, with daily crude import volumes hitting record highs.

OPEC's balanced 2026 view sharply contrasts with Goldman's 2.3 million bpd surplus forecast and Morgan Stanley's 3 million bpd H1 2026 surplus. China's record imports likely reflect continued strategic stockpiling at low prices rather than structural demand strength, as we've discussed regarding their inventory builds covering 75 days of demand.

________________________________________

CHINA-CANADA ENERGY COOPERATION

In non-oil news, China and Canada signed six initial cooperation agreements Thursday during Prime Minister Mark Carney's Beijing visit, covering areas including energy, crime, culture, forestry, and food safety.

The countries agreed to conduct energy policy talks and pledged support for cooperation on low-carbon energy sources and technologies. They will set up a ministerial dialogue on energy held every 12-18 months to advance specific items and explore further collaboration.

Interesting geopolitical realignment as Canada seeks closer energy ties with China, potentially reducing reliance on U.S. markets.

________________________________________

BOTTOM LINE

Tuesday's rally to $66.50 Brent evaporated in 48 hours as the Iran risk premium disappeared and bearish fundamentals reasserted themselves. Trump's assurance that Iran will stop killing protesters eliminated the immediate military action risk that drove oil up $4 in two days. The sell-off validates the market's persistent skepticism about geopolitical premiums without actual supply disruption. U.S. crude inventory posting the biggest build since November, with imports at 14-month highs, reinforces oversupply concerns. The U.S. selling its first Venezuelan cargo for $500M demonstrates these barrels are hitting the market now, not theoretically. The complex logistical challenges (ship-to-ship transfers, insurance restrictions, aging infrastructure) mean the 30-50 million barrels will take 3-4 months to fully clear, creating steady supply additions through Q1-Q2. Venezuela reversing production cuts and Enverus forecasting 1.5-3 million bpd by 2035 adds longer-term bearish pressure. OPEC's balanced 2026 view conflicts with Goldman and Morgan Stanley's 2-3 million bpd surplus forecasts, we side with the investment banks given the evidence. China's record imports reflect tactical stockpiling, not structural demand. Brent back at $64 and WTI near $60 returns us to the middle of the expected range after the brief geopolitical spike. Goldman's $54 Brent Q4 2026 target looks increasingly credible as Venezuelan supply hits the market and fundamentals overwhelm geopolitics. Today's 4% drop is a stark reminder that geopolitical premiums without sustained supply disruption are temporary. The trend remains lower absent OPEC+ production cuts, which Goldman doesn't expect. This week's volatility ($60 to $66.50 to $64) perfectly illustrates the tension between episodic geopolitical scares and persistent oversupply fundamentals. The fundamentals are winning.