Petrodollar protection
Venezuela Regime Change: Petrodollar, DXY and Oil Market Fallout
This is part 1 of a 2 part series.
Well Happy New Years Oilers
In this report: Global oil market to price in what US controlled Venezuelan supply means.
Key Stats. WTI +1.02% ($0.58). Open $57.04 High $58.55 Low $56.60 Close $57.32
Articles
U.S. Invasion of Venezuela: Energy Market Disruption Analysis
Assessing Venezuela’s Future After Nicolás Maduro’s Bold Capture
The Oil Sector’s Biggest Winners and Losers From Venezuela Regime Change
Video: Jeffrey D. Sachs: Interview with Prof. Glenn Diesen on the US attack on Venezuela
Video: Trump Attacks Venezuela and Captures President Maduro
Venezuela's Oil Industry: The Complete Picture
Visualizing 2026: Five Foreign Policy Trends to Watch
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There is a lot of social narrative that Venezuelan oil production will not only get back to 3mbpd lickety-split, but that the 300 gazillion barrels under the ground will come up in a gusher by Friday. People are vastly overestimating the real timelines of bringing oil online. So the much anticipated sell off on GLOBEX re-open may be over talked. But peeps love the drama of ‘calling it’.
Man, I wish I could call it! Down in the trade section,- see more.
The Onion
The narratives on this invasion are like an onion. On the outside, we have the thinly veiled reason that Maduro was basically a drug king pin and invading Venezuela was the only thing to be done to make America safe from the drugs smuggled in.
If you go a scratch deeper, you see that it’s got everything to do with Venezuela having the largest oil reserves on the planet. The specific reserves that can replace 100% of American oil imports. Heavy sour crude. I’m sure within 60 mins of the invasion, everyone on Twitter became an expert in the different grades of oil and specially the grades that US refiners are geared towards refining-HEAVY SOUR!
But if you drag your mind away from social media and armchair expertise for a minute, you will be free to think about the bigger picture. The pungent, eye watering centre of the onion.
The Petrodollar
In 2017 Maduro ordered the PDVSA (national oil company/ NOC) to price Venezuelan oil in Euros or Yuan- and strictly away from USD. They even made moves to move their oil to selling as a Petro token on crypto. Here is a quick explainer on The Petro dollar.
If Venezuela had succeeded in bringing a large share of its oil back online and pricing it outside USD, that would have posed a systemic risk to the dollar’s role in global trade. Less oil traded in dollars means less structural demand for dollars, more demand for euros or offshore yuan, and, over time, pressure on dollar assets. Foreign governments holding big piles of US Treasuries would see their DXY-denominated wealth marked down, with the pace of that move broadly linked to how much oil migrated out of USD pricing.Sounds familiar? DXY was down 10% in 2025.
So, in this framing, the US intervention in Venezuela can be read as a move to protect its FX dominance as much as anything else. Phase 1—neutralise a potential de-dollarised barrels story—looks complete. Phase 2, in this thesis, is a DXY resurgence in 2026. Like it or hate it, Daddy Dollar is not done yet. So think of the broader impacts- Strong reversal in Gold/ Silver-the dollar debasement havens. Rare earths will remain bid for industrial demand.
The China risk
Venezuela may represent the moment that erosion becomes collapse regarding International law. I’m sure much similar was said during the invasion of Iraq and all other US adventurism around the world throughout history.
Global onshore crude inventories have built by 2.5mb between November and December to date, driven by an increase in China crude arrivals. For data until Dec 18th, China crude arrivals from South America East Coast are up 42% mom, and arrivals from the Middle East Gulf are up by 9% m-o-m.- Vortexa.
You might be forgiven for proposing that China was forewarned of this invasion back when Trump took office.
If this comes as some level of surprise to China, it means that they are now forced to deal with The White House in order to keep up with their imports of heavy sour crude. It is extremely doubtful China will have any other option to keep up with current stocking rates.
India
Despite U.S and EU sanctions on Russian oil, India has been hogging down at the Russian discount aisle. It is presumed that they will continue to buy discounted and sanctioned oil via non-sanctioned entities and via the Russian shadow fleet.
Canada
Canada’s heavy-sour franchise into the US just went from “entrenched” to “on notice.”
Right now Canada is the US foreign barrel. In 2024, US crude imports from Canada averaged about 4.1 mb/d, over 60% of all US crude imports, with volumes hitting a record 4.3 mb/d.
In 2023, Canada exported 3.9 mb/d of crude to the US worth roughly $130 billion, and about 97% of all Canadian crude exports went south of the border.
Barron’s is already flagging Canadian producers as potential long-term losers from regime change in Caracas for exactly this reason. Barron’s Add in US political noise around tariffs on Canadian crude and you’ve got a pretty toxic risk cocktail. Investing.com
So no, Canada doesn’t go to zero – the pipe, geography and integration still matter – but the pricing power and growth runway for Canadian heavy into the US could be seriously goosed from here.
Commitment Of Traders Report
In summary: I think the specs are puking.
WOW nominal change
Open interest: Change -52,895, current 1,863,543, -2.76%
Commercials long: Change -15,252, current 798,358, -1.87%
Commercials short: Change -19,640, current 866,542, -2.22%
Non-comms long: Change -7,447, current 261,767, -2.77%
Non-comms short: Change -17,449, current 196,869, -8.14%- Sick bag anyone?
Commercials
Raising exposure through the last 2 years and hedging less current priced the last 3 months.
Non Commercials/ Specs
Both interesting and ominous that Spec short positioning is coming off Octobers 212k contracts high. The last time they were that short was Jan 2019. Hello my old friend. Got any more weight to throw on the shorts? Possibly not.
