Squeeze Now!
Market regime shift
In this report: WTI finished the week up 2.5% as Venezuela’s overhyped barrels, petrodollar power plays, stretched spec shorts and record commercial length combine into a buy-the-dip, puke-the-shorts Q1 bull regime in crude.
Key Stats. WTI +2.53% (+$1.45) for the week. Open $57.47 High $59.77 Low $55.76 Close $58.78.
Im bullish AF! Have a look at the COT analysis section below. Im going to try and get an XLE 0.00%↑ analysis piece out for paid subs this cominig week.
Given the diminishing relevance of EIA weekly data on the overall oil trading picture, I will no longer post the weekly data changes unless significant changes occur.
Articles
Venezuela presents a big headache for big oil
Five themes shaping the energy world in 2026
VIDEO: Full White House oil company executive meeting.
What Big Oil needs to invest in Venezuela
Yasser Elguindi on hidden demand, oil’s low point and OPEC reserves
Chevron in talks with US for expanded Venezuela oil license, sources say
History of U.S. involvement in Venezuela’s petroleum industry
Trump approves major sanctions bill that could threaten 500% tariff on India
Some notable squawk headlines from the week. Thanks to the boys in Newsquawk.com
FUN FACT: Venezuela produces superheavy oil as thick as tar. It doesn’t just flow; it needs to be melted to reach the surface, and after extraction, it hardens again, requiring diluent: no less than 0.3 barrels of diluent need to be imported for each exported barrel.
View
MAJOR NEWS FAILURE: In short, over the past week, we have seen the sellers have a go on Tue/Wed, over the announcement of 50mb oil in tankers from Venezuela appropriated by The US. Reminder-Global oil consumption is 104mbpd and US consumption 20.6mbpd. This was coupled with the lifting of sanctions, which only threatens a risk of new supply of approx 400k barrels-not a big deal. While the sellers and dumb money have headlines to go off of, the market continues to price out all and any greater supply narrative that Venezuela holds. ITS ALL PRICED IN and we trade in the high $50s WTI.
Remind me…how much were they calling for WTI to sell off this Monday?
I discuss below whats on the Oil picture table for Venezuela, but before that, more on the immediate to medium term. I think that we are in for net net upside on oil for Q1, buying dips and not selling rips. This will not be without deep and scathing pullbacks. Lets not rule out a new lows on the year though, as the 50million appropriated barrels is now drawing down on the oil at sea levels. I would like to see how the market digests this landing onshore. Chinas call to continue to build stores is still present. The elephant in the room-China is probably filling sores in anticipation of global conflict. If they decide to take Taiwan, they will need these. They are touted to replace lost imports from Venezuela with Iranian oil.
If you listen to the podcast above, you will hear Yasser Elguindi explain how they survived trading oil in 2025, by leaning into their tactical trading- day and intraday trading, rather than taking long views. I doubt this will change much over 2026. The forward curve has moved the backwardation from May (H)2026 to Feb (G) 2027. So net lower prices by start of 2027, however it is actually only about -$1.30cent, so not very deep. It’s the contango we have to focus on from there onwards. Very steep contango to June 2032 +$2.89 Time to get long XLE.
Venezuela
It is about the Petrodollar, as talked about last week. US adventurism 101. Yes, it’s also about oil, they are intrinsically bound. That’s why it’s called the Petro-Dollar. The broad US fiscal dominance strategy rarely changes; only the ground game and the way the aftermath is managed tend to differ from case to case. In Venezuela’s instance, there are some sizeable hurdles that may not have been fully thought through. Trump called leaders from the major oil companies to The White House Friday to “help” regenerate the Vz industry. They all played the bowing down game. Promising to be able to get resources deployed within a matter of weeks. Chevron in particular has been burnt twice with loosing their investments there to nationalisation. Will they want to go again? There may be an ocean of oil under Venezuelan soil, but it’s still there for a reason. Its gate is kept by corruption and a government that can not be trusted. The country so far has been uninvestable in.
On the numbers, it’s hard to make a straight-faced investment case. Rystad and Wood Mackenzie put Venezuelan breakevens somewhere around $60-$80/bbl, against a market that has been trading WTI in the high-50s to low-60s. The maths does not math! Without US supported subsidy, these are loss-making barrels. Any grand plan that brings US majors back in on sweetened terms is, in practice, a way of moving money from taxpayers to a very small group of monolithic companies that operate and think in generations, not presidential cycles. You can easily imagine the structure:
Washington offers guarantees or incentives, the firms provide the logos and technical expertise, and the political risk in Caracas is effectively laid off onto the American public. It happened with the GFC in ‘08 with the banking and subprime risks. The Banks opened up the risk filters, the tax payers provided the backstop.
The politics don’t make it any easier. Capital that arrives under a US flag is, by definition, political capital. If the reconstruction goes smoothly and Venezuela stays broadly aligned with Washington, it reinforces the story of the dollar hegemony and US influence. If it goes badly – if there’s pushback at home or in the region, or the optics sour – the blowback lands on the same symbols: the White House, the majors, and the currency they all operate in. This adventure in Venezuela would serve as a gift to BRICS nations who push to trade oil outside USD. A lot now hinges on how durable any new political settlement in Caracas actually is, and how its neighbours choose to read the whole exercise.
Then there’s the basic time mismatch. Oil projects work on 10–20 year horizons; US administrations work on four. Contracts are only as strong as the political coalition behind them, and that coalition can flip long before first oil. By the time any serious Venezuelan project is throwing off cash, Trump will most likely either be back playing his Bedminster golf course or be buried beside his ex-wife Ivana, who is already buried there. Yes, she is actually buried there (its a tax break. I’m not making this up). So will these oil majors be willing to take a flyer that depends on a strong arm president that only has 3yrs left in office? Lets see.
Institutionally, nothing gets easier. All upstream deals run through PDVSA, usually via production-sharing contracts. That means slow negotiations, multiple decision-makers and plenty of scope for rent-seeking.
Operationally, it’s also a long road back. Lifting output from today’s depressed levels requires more than $183 billion in capital (Rystad Energy below); it needs experienced people, functioning infrastructure and a reasonably stable operating environment. Venezuela is still struggling with shortages, weak institutions and high crime. Yes, oil companies have long experience working in difficult places, and they can staff up with a few hundred specialists to oversee local workforces. But rebuilding an entire system is a decade-long project, not a quick deployment.
And all of this comes for relatively modest impact on the global balance. The market has already learned to live without Venezuelan heavy, leaning more on Canada, the Middle East and others. Anything that happens in Venezeula over the next 10years will not impact prices at the pump in the western world.
It is big resources on paper, a high cost base, heavy political and legal risk, and limited upside for consumers. That’s not a clean growth wedge. It’s a politically driven experiment that most serious investors will approach, if they approach it at all, with one hand on the door.
Kpler estimate that Venezuelan production could take as long as end of 2027 to get back to 1mbpd. This would have been known to many professional market participants before Maduro as snatched last weekend. This is why we were not going to gap down to $52- coupled with the immediate new call on the market from China to replace its imports. China takes 2/3rds of exports from Venezuela.
Shout out to the Gold bugs!
One ounce of gold buys 100 barrels of oil. Only happened once in the last 35+ years: 2020 at the bottom.
Commitment Of Traders Report
This is not a drill- There is a MASSIVE divergence and regime shft at play- see below
In summary: The spec increased their shorts as of last Tuesdays settle. I think they are getting lifted out of those shorts. We will have to wait until next Friday to know for sure - however if we lift over last weeks highs in this current week, you will see them vomiting on the price ladder.
Open interest Prior net 1,898,257, Change+70,662. +3.72%
Commercials Long Prior net 808,460, Change +21,297. +2.63%
Commercial Short Prior net 878,713, Change +21,810. +2.48%
Non Comm Long Prior net 261,395, Change -2,439. - 0.93%
Non Comm Short Prior net 196,804, Change +4800. +2.44%
Commercials
Our system is now flagging that Commercials are at Long extreme levels.
Non Commercials/ Specs
Ok, here is where it gets interesting -
If we look at the COT momentum dashboard in our proprietary tool, we can see, the last time the Specs were at this level of shorts, 232,877, the market served up a $24 rip to the upside. So yeah, I’m bullish. The Spec shorts have very little short length left to deploy. Couple this with alerts we are getting on the Commercials high long levels, its a clear long picture.
See price chart here below.
A new regime.
Directional Divergence flipped positive -why it matters
What it is: “Directional Divergence” compares how concentrated the biggest long positions are vs the biggest short positions. Above zero = large players are more concentrated on the long side than the short side.
What changed: After years dominated by short-side concentration, the metric has crossed into positive territory and is rising. That signals a shift in leadership toward buyers among the top traders.
Why it matters: When the largest traders cluster on one side, it often sets the tone for the next leg. A sustained positive reading suggests accumulation and increases the odds of upside follow-through.
How to use it (practically):
Treat the flip as an early bullish bias while it stays >0 and widens.
Confidence improves if we also see strong weekly flow (position changes) and growing disagreement in net positions between commercials and non-commercials.
If the divergence slips back below 0 quickly, consider it noise rather than a regime change.
Bottom line: The balance of power among the biggest traders in oil is tilting long. If this concentration advantage persists and is confirmed by flows, the probability of a constructive, higher-price regime increases.
TRADE
The data is what I want to do the talking, certainly not me when it comes to directional bias. Even with a high conviction directional bias, you still have to hit the timing right or you are as good as 100% wrong.
Waiting is trading. Trading is waiting.
Disclaimer & Disclosure
For informational and educational purposes only. This publication does not constitute investment advice, a solicitation, or a recommendation to buy or sell any financial instrument. The author is not a registered investment adviser, commodity trading adviser, or financial analyst. All views expressed are personal opinions based on publicly available information. Trading futures, commodities, and derivatives involves substantial risk of loss and is not suitable for all investors. Past performance is not indicative of future results. Readers should conduct their own due diligence and consult a qualified financial professional before making any trading or investment decisions. The author may hold positions in instruments discussed.
Nice write up, I like the balanced/neutral view and lack of rhetoric in the writing. I think the impact sanctions have on pricing is under emphasised.