Beaten Up!
Traders hedged long
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In this report: Detailed Venezuela oil production, Indian imports change, price action review, Russian oil dented top-line numbers, US Oil production figures, C.O.T data, price analysis.
March book recommendation: Prisoners of Geography: Ten Maps That Explain Everything About the World-Tim Marshall
It’s a battle for oil bulls. If you are not feeling beaten up over the last 3 to 12 weeks as an oil trader, then I don’t think you’re doing it right. Patience and staying in spread positions (see C.O.T report below) has been the name of the game for participants over the last 3 months, with volumes lightening up on WTI and moving to Brent which we talked about in prior reports. Wednesday potentially ended a large amount of beatings/weakness that suppressed prices, OR we are about to enter into a whole new wave of selling. I’m at a failure to see what that catalyst would be at this time, but I’m in the bull camp as per the auction process I have observed on all timeframes. The next $10 on oil is up, rather than down.
In short, the Oval office meeting Friday, places more, not less supply risk on the markets in my view. I won’t be commenting further on it here but have talked more about it on this week’s VWAP Report.
Here is the chart I posted for premium subscribers last week with a 30 min version also included.
Here is what happened.
Articles
Trump axes Chevron's Venezuela oil license, citing lack of electoral reforms
Russia's Ryazan oil refinery halts operations after drone strike
Video: Jeffrey Sachs on Ukraine/ Russia/ US and Europe. The most important speech I have seen on this topic in 3 years.
European leaders gather in London to strengthen support for Ukraine
Macro
Zelensky meeting in London
The Ukrainian leader will meet UK and European leaders tomorrow, no doubt to discuss the reality of moving forward now without US backing. For oil trade, this will be key to monitor as we either have a clear outcome of Europe backing a continuation of fighting, or a more calculated political approach to returning to negotiation of a peace deal. The US peace/economic deal pivot will be a sharp knife for oil prices.
Venezuela Takes Heavy Hit
This is bullish.
Venezuela holds the largest proven oil reserves in the world, with over 300 billion barrels, but much of it remains untapped due to economic, political, and infrastructural challenges. Their oil sector faces yet another setback as the U.S. reinstates full sanctions, revoking Chevron’s license to operate in the country. This marks a reversal of Biden’s 2022 move to ease restrictions, which had helped stabilize Venezuelan production at 742,000 barrels per day in 2023, with exports reaching 550,000 barrels per day. Despite ongoing political turmoil, 2024 saw a 10.5% rise in exports, averaging 772,000 barrels per day, the highest level since 2019. However, with the latest sanctions, production and exports are expected to decline once again, though official figures remain pending.
What is the Trump grift? Hurt China a little!
This is of little consequence to Chevron who have been too busy next door in Guyana. In October 2023, Chevron announced a $53 billion acquisition of Hess Corporation, which holds a 30% stake in the massive Stabroek Block—one of the most significant offshore oil discoveries in recent years.
With this deal, Chevron gains exposure to over 11 billion barrels of recoverable oil reserves in Guyana, alongside ExxonMobil (45% stake and operator) and China’s CNOOC (25% stake).
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