US Treasury Announces New Sanctions Against Venezuela! How Will Oil Prices Move?

The U.S. Treasury Department announced new sanctions on Venezuela.

According to a report by CCTV, on December 11, the U.S. Treasury Department announced new sanctions against Venezuela. The targets of the sanctions include...VenezuelaThree nephews of President Maduro and another individual have been sanctioned. Additionally, six companies accused of transporting Venezuelan oil and six vessels that transport the country's oil have also been sanctioned.

Some analysts believe that these sanctions are aimed at preventing the sanctioned parties from accessing any property or financial assets in the United States and prohibiting American companies and citizens from engaging in any commercial dealings with them. Banks and financial institutions that violate this restriction will face sanctions or enforcement actions. Some analysts believe that U.S. President Donald Trump intends this move to further pressure Venezuela.

Geopolitical risks are escalating; can this provide support for oil prices?

The global crude oil market is currently embroiled in a complex tug-of-war between bullish and bearish forces. On one hand, the OPEC+ alliance, led by Saudi Arabia and Russia, has recently signaled a clear "strategic contraction" by suspending its planned production increase originally set for the first quarter of 2026. On the other hand, geopolitical "black swans" are stirring in the Americas—as the U.S. military recently intercepted and detained a sanctioned oil tanker near the coast of Venezuela. These seemingly contradictory pieces of information intertwine, posing a central question to the market: Can the tightening on the supply side and sudden geopolitical risks dispel the current cloud of excess supply hovering over the oil market?

Zhao Ruochen, an oil researcher at Galaxy Futures, believes that global crude oil inventories remain at a high level, and merely suspending the production increase plan in the first quarter of 2026 is unlikely to change the expectation of oversupply in the short term. Against the backdrop of continued high production in non-OPEC+ countries (especially the United States), their ability to balance the market by adjusting production and the marginal effect are weakening.

At the same time, news regarding Russia's crude oil production in November being significantly below its OPEC+ quota has also attracted attention. He Haoyun, a senior researcher at the CITIC Futures Research Institute, believes that this is mainly due to increased drone attacks by Ukraine on Russia's energy infrastructure and "shadow fleets," leading to a temporary setback in its exports. However, export data rebounded in early December, and there is currently no significant reduction in Russian oil supply. This suggests that the fluctuations in Russia's production are more of a short-term disruption and logistical challenge brought about by geopolitical conflicts, rather than a long-term capacity decline. Zhao Ruochen believes that the impact of Western sanctions leading to a reduction in buyers and facility attacks remains to be seen whether it is a short-term disturbance or a long-term trend. The uncertainty in Russia's production provides the market with a hint of tightness, but its sustainability and actual effects are questionable.

Recently, the U.S. military intercepted and seized a sanctioned oil tanker near the coast of Venezuela. Zhao Ruochen believes this marks a shift in U.S. sanctions against Venezuela from "written enforcement" to a new phase of "military enforcement." This could significantly increase the transportation risks and insurance costs for the "shadow fleet," potentially disrupting Venezuela's crude oil exports in the short term and driving up the premium on heavy crude oil.

He Haoyun analyzes that if the United States expands the scope of sanctions against oil tankers related to Venezuela, Venezuela's exports to other markets may face interruptions. Moreover, with the U.S. blockade of Venezuelan waters, it is becoming increasingly difficult for Venezuela to obtain the raw materials needed for oil extraction, which may lead to a passive decline in Venezuela's oil production in the future. Overall, the escalation of geopolitical conflicts between the U.S. and Venezuela provides some support for oil prices, but attention should still be paid to the actual implementation of production cuts and the potential for an agreement between the U.S. and the Maduro government.

Despite the pulse-like bullish factors from geopolitical risks, interviewed analysts believe that the medium to long-term trend of oil prices is still determined by the supply-demand balance sheet. He Haoyun stated that although OPEC+ will halt its production increase plan in the first quarter of next year, and the growth rate of non-OPEC+ supply will also slow down, the first quarter is the off-season for annual oil demand. From a static supply-demand balance perspective, the oil market still faces pressure from oversupply. Until there is a substantial reduction in supply, oil prices may continue to fluctuate and remain relatively weak.

Zhao Ruocheng cited predictions from multiple institutions indicating that in the first quarter of 2026, the accumulation rate of global crude oil inventories will reach its peak, with a daily supply surplus of 2 to 4 million barrels, which is the core factor suppressing oil prices.

Additionally, both analysts mentioned other variables. He Haoyun believes that the evolution of the geopolitical landscape and the release of domestic procurement demand could provide temporary support for oil prices. Zhao Ruocheng, on the other hand, thinks that the market is currently most concerned about whether the Russia-Ukraine conflict will ease; if it does, it will increase downward pressure on international oil prices. It is important to note that if there are risks of geopolitical conflicts in the Middle East, crude oil may quickly gain a geopolitical premium in the short term.