Oil Prices Slide

Oil prices moved lower on Wednesday after U.S. President Donald Trump said Venezuela would transfer between 30 million and 50 million barrels of sanctioned crude oil to the United States, reinforcing concerns that global supply will remain excessive.

U.S. West Texas Intermediate crude slipped 78 cents, or 1.37%, to $56.35 per barrel by 0200 GMT. Brent futures fell 61 cents, or 1%, to $60.09 per barrel. Both benchmarks had already dropped by more than $1 in the previous session.

Markets continue to weigh expectations of abundant supply in 2026 against uncertainty surrounding Venezuelan production following recent U.S. action against the country’s leadership. Trump said in a social media post that the oil would be sold at prevailing market prices, with proceeds controlled by the U.S. government to ensure the funds benefit both Venezuela and the United States.

Analysts said the comments signalled a clear preference for increasing supply rather than restraining output. Tina Teng, market strategist at Moomoo ANZ, noted that the statement added to fears of an oversupplied market.

Sources previously told Reuters that the agreement between Caracas and Washington could require diverting shipments originally intended for China. Venezuela has been selling its flagship Merey crude at a discount of roughly $22 per barrel to Brent at local ports, implying the deal could be worth up to $1.9 billion.

Exports of Venezuelan crude to the United States are currently handled exclusively by Chevron under a U.S. authorisation. The company has been shipping approximately 100,000 to 150,000 barrels per day and is the only operator to have continued loading and exports without disruption in recent weeks.

According to Yang An, an analyst at Haitong Futures, the additional Venezuelan supply has primarily affected the U.S. market and is likely to exacerbate the existing global surplus. Haitong Futures said in a research note that geopolitical developments have drawn attention away from underlying weakness in the physical oil market, where oversupply remains evident.

Middle Eastern crude prices have continued to weaken and now represent the softest segment of cross regional pricing, reducing investor appetite for further gains, the firm added.

Morgan Stanley analysts estimate that the oil market could face a surplus of up to 3 million barrels per day in the first half of 2026, driven by subdued demand growth and increasing output from both OPEC and non OPEC producers.

On the supply data front, U.S. crude inventories declined last week while fuel stocks increased, according to figures from the American Petroleum Institute. The API reported a draw of 2.77 million barrels in crude stockpiles. Official U.S. government inventory data is scheduled for release later on Wednesday, with analysts surveyed by Reuters expecting a modest build of around 500,000 barrels for the week ending January 2.