US-Venezuela tensions are skyrocketing: So why is oil so cheap?

Dubai: Oil prices barely moved in Christmas Eve trading as thin holiday volumes and mixed supply signals kept markets cautious, even as geopolitical friction rose between the United States and Venezuela. West Texas Intermediate (WTI) slipped three cents to trade near $58 a barrel, ending a five-day rally but remaining above recent lows.

The muted reaction reflects a disconnect shaping the market: tensions around Venezuela are growing, yet analysts continue to expect global oil supply to outweigh demand in 2025. That outlook is limiting price gains despite mounting concern over possible disruptions.

Washington has intensified efforts to curb Venezuela’s oil exports as part of its campaign against President Nicolás Maduro. Nearly half a dozen tankers carrying Venezuelan crude have left the country’s shores in recent days, but US authorities are still tracking a third vessel they believe is tied to restricted shipments.

For traders, the situation has become a major risk factor.

“The turmoil in the Caribbean is the focal point going into the holiday weekend,” said Dennis Kissler, senior vice president for trading at BOK Financial Securities Inc. He added that current US measures are not removing oil from the global market but may be slowing deliveries, “lending a bullish tilt to prices” if delays worsen.

So far, sanctions and shipping restrictions have not meaningfully reduced global supply. Markets are reacting more to what could happen next than to any confirmed decline in exports.

WTI remains on track for its biggest yearly loss since 2020 as traders brace for a wave of supply from producers both inside and outside the OPEC+ alliance. Major trading firms expect a surplus next year, a scenario that typically keeps prices subdued regardless of geopolitical tension.

Russian crude volumes stored offshore have surged, rising 48% since late August. Analysts say the buildup may reflect caution among shippers who fear that increasing pressure on Venezuela could eventually spill over to Russian cargoes.

Even with these risks, the central theme weighing on prices remains unchanged: more barrels are expected to hit the market in 2025, while demand growth is projected to cool.

New industry data added to signs of ample supply. Crude inventories in the United States rose by 2.4 million barrels last week, while gasoline and distillate storage also increased. Official figures will be released on December 29 after a holiday delay.

The latest build comes as markets already grapple with the prospect of higher output, reinforcing expectations that supply will stay ahead of demand — unless geopolitical flare-ups translate into tangible disruptions.

With trading hours shortened ahead of Christmas and markets closed the following day, price movements stayed muted. But the quiet session does not capture the scale of uncertainty facing traders in early 2025.

Sanctions, tanker delays, and rising tensions around Venezuela are giving markets reasons to stay alert. At the same time, forecasts of oversupply and rising inventories are pushing back against any immediate price surge.

For now, the balance is holding — but pressure points are building.