Morning Highlights: Oil Slides as Trump Softens Greenland, Iran Threats; Valero, Phillips 66 Buy Venezuelan Cargoes

Thursday, January 22, 2026 | 6:15 AM EST

________________________________________

MARKET SNAPSHOT

Oil reversed recent gains as Trump de-escalated multiple geopolitical threats and U.S. crude inventories posted a larger-than-expected build. Brent fell $0.92 (0.9%) to $64.32/bbl, while WTI dropped $0.87 (0.9%) to $59.75/bbl as of 6:15 AM EST. Contracts climbed over 0.4% Wednesday following Tuesday's 1.5% gain after Kazakhstan halted Tengiz and Korolev output.

"There is a deflation of risk premium related to the Greenland debacle and Iran supply risk has also been reduced," said Saxo Bank's Ole Hansen.

________________________________________

TOP DEVELOPMENTS

Trump De-escalates on Multiple Fronts

Greenland: Wednesday, Trump ruled out the use of force to acquire Greenland and stepped back from tariff threats aimed at European allies (the 10% immediate, 25% by June tariffs announced earlier).

Iran: Trump said he hoped there would be no further U.S. military action in Iran, but added the U.S. would act if Tehran resumed its nuclear program.

Ukraine: Trump said he believed "we're reasonably close" to a deal to end the Russia-Ukraine war, adding he would meet Ukrainian President Zelenskiy later Wednesday.

Major Implication: An end to the Ukraine war would likely result in removal of U.S. sanctions on Russia, which would limit supply disruptions and weigh down prices. This represents a significant bearish catalyst if realized, potentially adding millions of barrels of Russian supply back to accessible markets.

________________________________________

VALERO, PHILLIPS 66 BUY FIRST VENEZUELAN CARGOES FROM VITOL (As per Reuters “sources”)

Historic Deals: Valero bought a cargo of Venezuelan crude, with Phillips 66 also purchasing a cargo, two sources told Reuters Wednesday. These mark some of the first deals by U.S. Gulf Coast refiners under Washington's agreement with Caracas to export up to 50 million barrels.

Deal Terms: Both bought crude from trading house Vitol, traded for delivery to the U.S. Gulf Coast at a discount of about $8.50-$9.50/bbl to Brent.

While Valero and Phillips 66 have been buyers of Venezuelan crude through PDVSA's partner Chevron, the deals mark the first purchases from trading houses only authorized this month to market Venezuelan crude. Vitol and rival Trafigura were the first firms awarded licenses after Maduro's ouster in early January.

Pricing Analysis: The $8.50-$9.50/bbl Brent discount to U.S. Gulf Coast refiners compares with:

• Vitol's recent $5/bbl discount offers to Chinese refiners (up from $15/bbl pre-Maduro capture)

• The wider discount to U.S. refiners likely reflects transportation costs and quality differentials

Venezuelan Supply Flowing: These deals demonstrate that Venezuelan barrels are actively entering the market through legitimate channels, adding to the bearish supply picture. Valero, Phillips 66, and Vitol did not immediately respond to comment requests. The White House also did not respond.

________________________________________

U.S. INVENTORIES: BIGGER BUILD THAN EXPECTED

API Data: U.S. crude and gasoline stocks rose while distillate inventories fell last week, according to API figures cited by sources Wednesday:

• Crude stocks: +3.04 million barrels (vs. Reuters poll estimate of +1.1 million)

• Gasoline inventories: +6.21 million barrels

• Distillate inventories: -33,000 barrels

The crude build was nearly 3x larger than the 1.1 million barrel average forecast from eight analysts polled by Reuters.

Context: "High crude inventories are limiting further gains in oil prices in an oversupplied market," said Haitong Futures analyst Yang An. This follows last week's report of the biggest crude stocks build since November with imports hitting a 14-month high.

Official EIA data releases at 12 PM EST today for confirmation.

________________________________________

IEA DEMAND REVISION RECAP

Wednesday's IEA monthly report revised 2026 global oil demand growth to 930,000 bpd (from 860,000 bpd), implying a 3.69 million bpd surplus this year (narrowed from 3.84 million bpd). While marginally better, the surplus remains massive and consistent with Goldman's 2.3 million bpd and Morgan Stanley's 3 million bpd H1 2026 forecasts.

________________________________________

BOTTOM LINE

Oil is giving back this week's Kazakh outage-driven gains as geopolitical risk premiums evaporate across multiple fronts. Trump's Wednesday de-escalation removed immediate threats on Greenland (tariffs on eight European nations), Iran (military action), and potentially Ukraine (deal "reasonably close"). The Ukraine development is particularly bearish if realized, as ending the war would likely lift Russian sanctions and return significant supply to accessible markets. Valero and Phillips 66's Venezuelan crude purchases from Vitol demonstrate that the 50 million barrels are actively hitting the U.S. market at $8.50-$9.50/bbl Brent discounts, adding immediate supply. The 3.04 million barrel crude inventory build (3x larger than expected) reinforces persistent oversupply, with gasoline building 6.21 million barrels signaling weak product demand. The bearish trifecta of de-escalating geopolitical risks, Venezuelan barrels flowing, and large inventory builds overwhelms the temporary Tengiz/Korolev outage (7-10 days remaining). Brent at $64.32 and WTI at $59.75 keeps both in the middle of expected ranges, but the bias is clearly lower. If Trump achieves a Ukraine peace deal and Russian sanctions lift, that would validate Goldman's path toward $54 Brent by Q4 2026. CPC's SPM-3 nearing completion will ease Kazakh export constraints soon. The IEA's 3.69 million bpd surplus, combined with Venezuelan supply additions and potential Russian sanction relief, creates a profoundly bearish setup. Watch today's EIA data for confirmation of the large API build. The market is systematically removing geopolitical risk premiums and refocusing on the fundamental reality: massive oversupply with weak demand growth. The rally from $60 to $66.50 on Iran fears has completely reversed. We're back where we started, and the path points lower.