The US’s military actions in Venezuela over the weekend, coupled with OPEC+’s Sunday ‘production quota’ announcement, keeps the case for a growing global oil supply glut front and centre of commodity investors’ minds.
In particular, having captured Venezuelan President Maduro on Saturday, Trump announced that he will ‘run’ the country (at least for now) and, with that, fix its broken oil infrastructure (NB using American oil companies - hence likely why oil services and E&P stocks have rallied in the past few days, see fig 1). Venezuela, as is well known, has the largest oil reserves in the world (i.e. 300bn barrels).
If successful*, therefore, Venezuela could add significantly to the longer term supply dynamics in the oil market (which was already a key theme in 2025 – see Longview research for detail). In that respect, this action dovetails well with Trump’s stated policy agenda, i.e. to lower oil prices.
Elsewhere this weekend, OPEC+ decided yesterday (Sunday) to keep its oil production quotas unchanged. In other words, Saudi’s policy stance remains relatively stubborn, despite: i) The recent falls in the oil price (with oil near multi-year lows, see fig 2); ii) the now stronger Venezuelan supply outlook; and iii) the (consensus) view in markets that OPEC+ has increased supply (reversed cuts) too quickly. In that sense, oil price risks remain skewed to the downside (from a medium term supply perspective).
In the near term, though, speculative positioning in the oil market is already bearish. That is, with the Commitment of Traders (COT) Report now updated (i.e. post the US government shutdown), the latest data shows that net long positioning has fallen sharply in recent weeks – to its lowest level since 2010 (fig 3). Despite medium term risks, therefore, there’s clearly a case for a short term relief rally.
Fig 1: Various US oil service and E&P company share prices (%, last 3 months)
*There are, of course, multiple risks to this course of action (i.e. many ‘unknown unknowns’). In that sense, it’s by no means certain that Trump will be successful in unlocking significant Venezuelan oil flows.
Fig 2: Brent oil price futures candlestick, shown with 50 & 200 day moving averages (US$/barrel)
Fig 3: Brent oil net speculative LONG/SHORT positions vs. oil price (US$/barrel)
