US crude oil futures settled at $55.99 per barrel, declining $1.14 or 2.0% as markets continued to react to President Donald Trump's announcement that Venezuela would transfer millions of barrels of crude to the United States. The settlement price reflects ongoing pressure from oversupply concerns following the Venezuela oil deal announcement.

West Texas Intermediate crude oil prices have extended losses after Trump announced that Venezuela would turn over millions of barrels of crude to the US, which will be sold at market prices to benefit both countries. Brent crude also remained under pressure, settling below $60.70 per barrel.

On the Multi Commodity Exchange (MCX), crude oil futures for January delivery declined by Rs 110, or 2.11 per cent, to Rs 5,100 per barrel in a business turnover of 16,723 lots. The February contract also depreciated by Rs 94, or 1.8 per cent, to Rs 5,125 per barrel in 5,076 lots.

Venezuela Oil Transfer Details

Venezuela's interim authorities will be giving up as many as 50 million barrels of "High Quality, Sanctioned Oil" to the US, Trump wrote in a social media post. The president said US Energy Secretary Chris Wright has been tasked with executing the plan "immediately." At current market prices, this volume represents a significant addition to US oil supplies.

Market Analysis and Supply Concerns

The market continues to digest the fallout from the ouster of Venezuelan leader Nicolás Maduro by American forces and its implications for oil exports and the country's energy industry. According to Warren Patterson, head of commodities strategy at ING Groep NV in Singapore, the US measure "reduces the risk of Venezuela having to reduce output due to storage constraints, so reducing fears of supply disruptions."

Mohammed Imran, Research Analyst at Mirae Asset ShareKhan, said the US intervention in Venezuela has brought the country's crude operations under greater US influence, strengthening the long-term US energy security and reducing reliance on OPEC+. "This in turn, will weaken the cartel's pricing power in global crude markets," he added.

Patterson noted that "Overall, the fundamental outlook remains bearish, suggesting that there is further downside ahead for oil prices." The continuing flows will add to an already oversupplied market, after OPEC+ and others increased supply against a backdrop of subdued demand growth.

Current Market Performance

Crude oil prices extended their decline, sliding to multi-week lows amid easing concerns over potential supply disruptions. Kaynat Chainwala, AVP Commodity Research at Kotak Securities, noted that the latest American Petroleum Institute (API) data showed US crude inventories fell by 2.80 million barrels last week, while gasoline and distillate stocks rose sharply, adding to pressure on prices.

Venezuelan Oil Industry Context

Venezuela was once an oil-producing powerhouse, but the nation's output has slumped over the past two decades and now represents just 1% of global supplies. Chevron Corp. remains the only American major operating in Venezuela under special US permission, and the company continues to load crude. All of the oil goes to refineries in the US, including Valero Energy Corp., Phillips 66 and Marathon Petroleum Corp.

Trafigura Group and other traders will hold talks with the US about how they can return to buying Venezuelan oil as Trump is set to meet with energy executives at the White House within the next week. The president has indicated that American companies will spend billions reviving Venezuela's oil industry.

Oil prices edged higher as traders digested new measures from the US regarding Venezuela, including plans to indefinitely control future crude sales and the seizure of additional sanctioned tankers. The developments mark a shift in market sentiment as the Trump administration expands its involvement in Venezuelan oil operations.

Current Market Performance

Crude oil benchmarks showed upward movement as markets reassessed the latest US-Venezuela developments:

West Texas Intermediate traded around $56.00 per barrel after declining 4.00% over the previous two sessions. Brent settled below $60.00 per barrel, closing 1.20% lower on Wednesday. Global benchmark futures have started the year on a soft footing, following the steepest annual decline since 2020.

US Control Framework and Venezuelan Response

The Trump administration is implementing comprehensive measures to control Venezuelan oil sales and rebuild the country's energy sector:

Energy Secretary Chris Wright announced the US would initially start offering stored crude and then sell Venezuelan supply, with the Energy Department confirming oil was already being marketed. Venezuela's state oil company reported negotiations with Washington over crude sales through a framework similar to the existing arrangement with Chevron Corp., the only US major operating in the country.

Industry Response and Market Participation

Major oil companies and traders are positioning themselves for increased Venezuelan crude availability:

Citgo Petroleum Corp., the US refiner indirectly owned by Venezuela, is considering resuming purchases for the first time since sanctions cut off its supply in 2019. Trafigura Group has expressed interest in Venezuelan crude, while Chevron is in talks with the US to extend its license to operate in the country.

Enforcement Actions and Market Implications

Despite increased cooperation, the US continues enforcement actions against sanctioned vessels:

The US seized two more sanctioned oil tankers, including the Bella 1, a vessel that attempted to evade capture by registering under a Russian flag but was intercepted south of Iceland. The prospect of higher Venezuelan exports has already sent Canadian crude prices plunging and would add barrels to a market grappling with ample supply as OPEC+ and others increase production.