Oil Slips as U.S.-Venezuela Crude Import Deal Signals Rising Supply

Key Moments

Brent crude fell to $59.89 per barrel and U.S. WTI declined to $56.13 per barrel, extending losses of more than $1 from the prior session.
President Donald Trump said the U.S. reached a deal to import $2 billion of Venezuelan crude, potentially redirecting cargoes originally headed to China.
Morgan Stanley projected a possible surplus of up to 3 million barrels per day in the first half of 2026, while Venezuelan Merey crude has been sold at about $22 per barrel below Brent.

Market Reaction to U.S.-Venezuela Deal

Oil prices moved lower on Wednesday after President Donald Trump announced that the United States had secured an agreement to import $2 billion worth of Venezuelan crude, a development expected to boost supply to the world’s largest oil-consuming market.

At 0550 GMT, Brent crude futures dropped 81 cents, or 1.3%, to $59.89 a barrel, while U.S. West Texas Intermediate (WTI) crude slipped $1, or 1.7%, to $56.13 a barrel.

Both benchmarks extended declines of more than $1 from the previous trading session, with market participants anticipating that global supply would remain plentiful this year.

Flows, Geopolitics, and Supply Dynamics

The agreement could initially involve diverting cargoes that had been destined for China, as Venezuela may look to offload millions of barrels of crude currently stuck in tankers and storage facilities, in an effort to avoid further tensions with the United States.

Trump had earlier insisted that Venezuela open its energy sector to U.S. oil companies or face escalating military pressure. Following that stance, U.S. forces captured Venezuelan President Nicolas Maduro at the weekend.

Analysts indicated that the agreement is likely to reinforce downward pressure on prices in an already oversupplied market.

“Venezuela’s oil exports to the United States have first and foremost disrupted the U.S. market, which will also deepen the global oversupply,” said Yang An, an analyst at Haitong Futures.

Surplus Outlook and Price Implications

Morgan Stanley analysts estimated that the oil market could see a surplus of up to 3 million barrels per day in the first half of 2026, citing weak demand growth last year alongside increasing output from both OPEC and non-OPEC producers.

At the same time, analysts at BMI noted in a Wednesday report that the potential for higher volumes of relatively low-cost Venezuelan crude exports could delay plans to expand production capacity in the United States and other regions. BMI is a unit of Fitch Solutions.

Venezuela has been marketing its main crude grade, Merey, at around $22 per barrel below Brent for delivery at its ports.

“That raises the expected price of oil over the medium term, especially if the Venezuelan regime survives,” the BMI analysts said.