MARKETWIRE ALERTS

MARKETWIRE ALERTS 

MarketWire Afternoon News for January 5th:

Updated at 5:00 PM ET 

HEADLINES:

— Venezuela Shift Unlikely to Disrupt Midwest Crude Flows

— Traders See Little USWC Impact Amid Venezuela Conflict

— Mix of Optimism, Caution for U.S. Oil in Venezuela Shift

— Why is Venezuela so Important for the U.S. Oil Market?

— Venezuela a Moderate Risk for Oil Benchmarks: Traders

— ISM: U.S. Manufacturing PMI Drops to 47.9 in Dec

— OPEC+ Pauses Output Hikes for Feb and March

NEWS:

Venezuela Shift Unlikely to Disrupt Midwest Crude Flows

 The potential return of Venezuelan crude to the U.S. market following the capture of President Nicolás Maduro by U.S. forces over the weekend is expected to have limited impact on Midwest crude supply dynamics, particularly given PADD 2’s structural reliance on Canadian heavy sour crude.

Venezuelan heavy crude shares quality similarities with Canadian oil sands production, including high sulfur content and lower API gravity, making it technically compatible with Midwest refining systems. Even so, compatibility alone is unlikely to translate into immediate supply shifts for PADD 2.

According to the U.S. Energy Information Administration, Canadian crude oil imports into the Midwest averaged about 2.8 million bpd in October 2025, accounting for roughly 61% of total refinery crude inputs for the region during the latest reported month. Midwest refiners routinely process Canadian grades such as Western Canadian Select, Cold Lake Blend, Access Western Blend, Syncrude Sweet Blend, and other diluted bitumen streams, supported by direct pipeline connectivity from Western Canada. That level of dependence underscores the entrenched role Canadian barrels play in Midwest operations, supported by logistical efficiency and long-standing commercial relationships.

By contrast, Venezuelan crude production remains significantly limited, averaging around 940,000 bpd in 2025, a fraction of the country’s late-1990s peak near 3.45 million bpd, according to OPEC secondary-source estimates published in its Monthly Oil Market Report. The scale and timeline of any meaningful recovery remain significant hurdles.

“There is unlikely to be any near-term impact on Midwest crude or refined product flows from Venezuela, given unresolved questions around production recovery and investment,” a Midwest trader familiar with the matter said.

Traders See Little USWC Impact Amid Venezuela Conflict

Developments in Venezuela have drawn renewed attention across global crude and refined product markets, but traders on the U.S. West Coast say the situation is unlikely to materially affect gasoline or distillate pricing in California, where supply dynamics remain driven far more by local refinery operations than by changes in Latin American crude flows.

“I don’t think the situation in Venezuela will affect USWC,” one U.S. West Coast trader said, pointing to the region’s limited exposure to Venezuelan barrels and the structural isolation of the California fuel system.

California refineries primarily process a blend of domestic crude from Alaska,  ANS, and the U.S. Lower 48 states, along with imports of Napo and Oriente crudes from Ecuador, Castilla Blend from Colombia and, at times, Arabian Heavy from the Middle East. Venezuelan crude has not been a meaningful feedstock for California in recent years, data from the Energy Information Administration shows. ” While U.S. imports of Venezuelan crude have partially resumed, those barrels have largely flowed into U.S. Gulf Coast refineries, with little to no domestic crude and imports from the Latin America and Middle East,” the EIA says.

As a result, market participants say shifts in Venezuelan production or exports are unlikely to translate into immediate changes in West Coast refined product balances.

Instead, traders continue to focus on refinery reliability and operational issues within the state, which historically have had a far greater impact on prices than global geopolitical developments. California operates as a constrained fuel market, dependent on a small number of refineries producing CARB-compliant gasoline, with limited ability to quickly replace lost barrels through imports or inter-regional transfers.

That dynamic has kept the market sensitive to outages that could push spot prices higher dramatically. In recent weeks, however, at the onset of the new year, prices have remained relatively steady amid the absence of new disruptions.

Spot gasoline markets on the West Coast opened the new year on stable footing. Los Angeles CARBOB traded at a 20 ct premium to February NYMEX RBOB futures, while San Francisco CARBOB was assessed at a 25 ct premium to the same contract. Market participants said values have held within a narrow range since the start of January, reflecting balanced supply conditions and the lack of new refinery flares.

Looking ahead, participants said any sustained move in West Coast gasoline prices is more likely to be triggered by refinery issues, seasonal maintenance, or unexpected demand shifts than by developments in Venezuela.

“Venezuela’s aging petroleum infrastructure would require substantial investment to significantly increase output, making it unrealistic to expect that higher Venezuelan production would quickly translate into cheaper gasoline prices on the U.S. West Coast,” Paul Ronney, professor and chair of Dept. of Aerospace and Mechanical Engineering at the University of Southern California, said. “Venezuelan oil is very heavy and high in sulfur, which makes it more expensive to produce and refine than lighter U.S. grades like West Texas Intermediate.”

Mix of Optimism, Caution for U.S. Oil in Venezuela Shift

U.S. oil majors, refiners and energy infrastructure builders look poised for new opportunities in Venezuela as the White House asserts control over the OPEC member after the capture of Venezuelan president Nicolas Maduro by U.S. forces.

But any optimism over new deals must be balanced by the technical and political challenges of expanding Venezuela’s energy sector with the collaboration of a regime on the ground that still appears loyal to Maduro.

Stock prices of drillers Chevron, Exxon and ConocoPhillips rallied on Monday (1/5) alongside those of refiners Valero and Marathon Petroleum and oilfield services firms Halliburton and SLB as market participants linked them to potential long-term contracts in Venezuela under U.S. President Donald Trump’s order.

“Trump has publicly said the U.S. will run or manage Venezuela until there is a safe, proper, sensible transition, with American oil companies brought in under U.S. military protection to repair and operate Venezuela’s energy infrastructure, which does not sound like a one-week job,” said Phil Davis of PSW Investments.

While President Trump claimed U.S. firms are “primed to invest,” the companies themselves have been notably more circumspect.

ConocoPhillips stated it is “monitoring developments” but called speculation on future investments premature given the legal and security uncertainties.

Chevron said it remains focused on the safety of its existing employees and assets while operating in full compliance with current laws. Most majors indicate that a stable security environment is a prerequisite before they commit the $10 billion annually needed for a turnaround.

Analysts from Goldman Sachs and Rystad Energy, meanwhile, suggest that any meaningful production increase – potentially reaching 4 million bpd – could take a decade to realize. They warn that a chaotic transition in Venezuela could mirror that of post-Gaddafi Libya, where fractured governance kept foreign capital on the sidelines for years.

Chevron has been the only U.S. oil major still operating in Venezuela after the expulsion of other production sharing contractors over the past decade. It could benefit from any immediate ramp-up in Venezuelan production, which has been curtailed at around 1.1 million bpd, according to OPEC, compared with the previous heyday of 3.5 million bpd.  

Chevron partners with state-owned PDVSA in four major joint ventures, including the vertically integrated Petropiar project which upgrades extra-heavy crude into higher-value synthetic oil.

Halliburton and SLB’s share price action was in anticipation that rebuilding Venezuela’s crumbling infrastructure will require tens of billions in new contracts for these specialized service providers.

Refiners like Valero and Marathon Petroleum are optimized to process the heavy, sour crude that Venezuela produces, which is currently scarce due to regional production declines. Traders in this sector are looking for signals on when the “oil quarantine” might be eased to allow heavy barrels back into U.S. ports. They view the potential return of Venezuelan crude as a way to lower input costs compared to more expensive Middle Eastern grades.

Why is Venezuela so Important for the U.S. Oil Market?

U.S. refining:

* Most of the U.S. Gulf Coast refinery infrastructure was built to process heavy, sulfur-rich grades like Venezuelan crude oil. In the 2000s, half of Venezuelan oil exports went to the U.S.

* Mexico, Colombia and Ecuador are suppliers of heavy sour crudes for U.S. refineries, but aging oil fields in those countries have translated into a declining production in recent years. Heavy sour crudes from Venezuela could be a natural replacement for those grades.

* Venezuelan crude can replace costly Saudi Arabian heavy grades consumed by U.S. refiners, especially on the West Coast.

* U.S. imports of Venezuelan crude returned from a three-year hiatus in 2023, averaging 231,000 bpd in 2024 and 141,000 bpd last year, according to Energy Information Administration data.

Crude production and reserves:

* Venezuela is one of the members of the Organization of Petroleum Exporting Countries with one of the largest proven reserves in the world. Nearly 303 billion bbl, according to OPEC data. The country is exempt from OPEC production curtailment agreements.

* Production peaked at 3.45 million bpd in the late 1990s and has been stable around 2.35 million bpd in the years prior to the U.S. shale boom, according to Platts data. The oil price crash and consequent lack of revenues and reinvestment led Venezuelan crude production to plummet below 1 million bpd by 2019.

* Production has gradually increased since troughing at 280,000 bpd during the height of the pandemic induced demand crash in mid-2020. In 2025, production averaged 937,000 bpd, according to Platts’ OPEC production survey.

* Sludgy Venezuelan crude requires diluents to be piped onto tankers such as naphtha or high gravity crude oil. Venezuela is a potential consumer of U.S. light crudes which can be used as a blender for extra-heavy Venezuelan grades with 16 API gravity. The first export of U.S. crude to the international markets in 2016 had Venezuela as a destination.

Venezuela a Moderate Risk for Oil Benchmarks: Traders

Venezuela remains a moderate risk to oil futures as traders continue monitoring the country’s limited crude production and exports following the weekend capture of Venezuelan president Nicolas Maduro by U.S. military forces.

While the arrest of Maduro and his wife Cilia Flores on Saturday (1/3) to face narco‑terrorism and other charges in the U.S. was a significant geopolitical event, crude prices were expected to trade in a narrow range, due to multiple uncertainties posed by the crisis. 

NYMEX WTI for February delivery was up $0.55 at $57.87 bbl while February ICE Brent rose $0.53 to $61.28 bbl on Monday (1/5) morning after OPEC+ members on Sunday (1/4) reaffirmed their plan to pause production hikes in the first quarter of 2026. The group also acknowledged the Venezuela shock to the market and the need for output stability amid global oversupply concerns.

“WTI could drop back to the low $50s bbl if U.S.-Venezuelan collaboration could expeditiously result in higher production,” John Kilduff, partner at New York energy hedge fund Again Capital, told DTN. But political realities on the ground in Venezuela suggest the opposite, he said.

Despite U.S. claims of her cooperation, acting Venezuelan president Delcy Rodríguez maintains the country will not become a colony of the United States, highlighting a friction point that may delay the return of foreign investment. 

“In the immediate aftermath, we could have the market moving higher as it prices in the risk of Venezuelan production being suspended or lost as the nation reacts to the political impact of the whole development,” Kilduff said. But that needs to be juxtaposed against Venezuela’s position in the global oil market, where the risk will remain moderate for now, he added.

According to OPEC’s monthly report, Venezuela produces about 1.1 million bpd, of which some 900,000 bpd is exported, mostly to China.  That ranks the country 18th among global oil producers, according to OPEC.

Phil Davis, founder of PSW Investments, also cited the psychological impact of the Venezuelan situation on Monday’s crude prices, noting that short-term supply disruption sent WTI’s front-month contract flying from $56.21 on Friday to $57.90.

“The markets are waking up to a geopolitical risk premium that finally has some teeth,” Davis added.

The Trump administration has signaled a desire for U.S. oil companies to rebuild Venezuela’s infrastructure, asserting that Washington will effectively run the nation during its transition.

U.S. President Donald Trump emphasized that American corporations would invest billions to fix the badly broken sector, viewing the country’s vast reserves as a strategic asset for the Western Hemisphere.  Venezuela is estimated to hold the world’s largest proven crude oil reserves, at approximately 303 billion bbl, according to OPEC.

ISM: U.S. Manufacturing PMI Drops to 47.9 in Dec

A key U.S. purchasing managers index released on Monday (1/5) showed a reading that dropped from last month and remained below a core marker that separated expansion from contraction – the tenth straight month for such a trend.

The Manufacturing Purchasing Managers Index of the Institute for Supply Management stood at 47.9 in December, down from 48.2 recorded in November. It was the fourth monthly drop in a row and marked the tenth consecutive month that the reading was below the 50-point mark that separates the positive and negative constituencies for the index.

This is not the first extended period of contraction in U.S. manufacturing PMI. Prior to a two-month expansion between January and February this year, the index saw 26 straight months of weakness.

The latest decline in U.S. manufacturing activity was attributed in part to pullbacks in new orders and employment. The New Orders Index remained in contraction territory for the fourth month in a row.

“In December, U.S. manufacturing activity contracted at a faster rate, with pullbacks in the Production and Inventories indexes leading to the 0.3-percentage point decrease of the Manufacturing PMI. Those two subindexes increased in November, so their contraction this month continues the short-term “bubble” of improvement indicative in the last several months of PMI data — and a hallmark of recent economic uncertainty in manufacturing,” said Susan Spence, chair of the ISM Manufacturing Business Survey Committee.

Two manufacturing industries reported growth in December. Petroleum and coal products were among the fifteen manufacturing industries surveyed reporting contraction.

In December, the production index fell by 0.4 points to 51, while the backlog of orders index rose by 1.8 points to 45.8 in November.

The contraction in new export orders slowed, with the associated index rising by 0.6 points to 46.8 in December.

The customers’ inventories index remained in “too low” territory, dropping by 1.4 points to 43.3, according to the report.

The contraction in employment slowed, with the index rising by 0.9 percentage points to 44.9.

December’s prices index was unchanged from last month.

Following the release of the data, crude oil futures softened but remained up on the day, with the front-month NYMEX West Texas Intermediate futures contract up by $0.72 to $57.73 bbl. The U.S. dollar index dropped by 0.08 points to 98.295 but remained up by 0.137 points on the day against a basket of foreign currencies.

OPEC+ Pauses Output Hikes for Feb and March

OPEC+ countries reconfirmed on Sunday (1/4) their decision to pause planned oil production increases in February and March, as announced on November 2, 2025.

The move was attributed largely to seasonal factors and ongoing efforts to balance global supply and demand. 

Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria, and Oman held a virtual meeting on Sunday to assess current market conditions and future outlooks.  

During the meeting, the OPEC+ members maintained their commitment to market stability “based on steady global economic outlook and current healthy oil market fundamentals reflected in low inventories,” according to the group statement.

The OPEC+ members also reconfirmed that voluntarily curtailed production of 1.65 million bpd could be gradually returned to the market, either partially or fully, depending on market condition developments. 

Additionally, the group stated that production adjustments could be paused or reversed if necessary. This includes the continuation of earlier voluntary cuts totaling 2.2 million bpd that started in November 2023. 

The eight countries agreed to continue holding monthly meetings to monitor market conditions. The next OPEC+ meeting is scheduled for February 1.