Oil price topping signal? Venezuela blockade situation may bring new variables to the crude oil market

Policy Pressure vs. Oversupply, WTI Crude Oil Faces Dilemma

Reuters latest report reveals that the U.S. administration has decided to focus efforts on implementing an oil embargo against Venezuela for at least the next two months. This move signifies that Washington prefers to prioritize economic sanctions over military intervention. According to the International Energy Agency’s assessment, if the U.S. continues its embargo policy, it will directly impact Venezuela’s fiscal revenue—over 90% of the country’s exports are oil, which is its economic lifeline.

Currently sanctioned Venezuelan oil tankers are still operating secretly under embargo. Bloomberg ship tracking data shows that a 27-year-old crude oil tanker will soon arrive in the country. This “zombie oil tanker,” which was supposed to be dismantled in 2021, reflects Venezuela’s desperate efforts to sustain its fragile oil industry. Additionally, Cuba relies heavily on Venezuelan fuel supplies; if its crude oil imports continue to decline, it will further worsen its already severe economic crisis.

Oversupply Dominates, Limited Geopolitical Impact

Although U.S. embargo actions will inevitably impact the supply side of oil, the market generally expects a global oversupply situation. The International Energy Agency forecasts that due to increased production by oil-producing countries and weak demand, the global oil market will remain oversupplied from 2025 to 2026, with excess supply reaching up to 4.09 million barrels per day. OPEC+ has announced a pause on production increases in the first quarter of 2026, further confirming the reality of oversupply in the global market. This undoubtedly limits the potential for oil prices to rebound significantly due to geopolitical events.

Macro Shift, Weakening Dollar May Boost Oil Prices

The Federal Reserve’s rate cut expectations are becoming clearer. Data from the U.S. Department of Labor shows that the November Consumer Price Index (CPI) increased by 2.7% year-over-year, lower than September’s 3%; core inflation rose by 2.6% YoY, indicating inflation pressures have eased significantly. Although non-farm payrolls increased by 64,000, slightly above expectations, the unemployment rate unexpectedly rose to 4.6%, the highest since September 2021, revealing that the labor market is entering a “hiring freeze.”

CME FedWatch data indicates that the market still expects two rate cuts next year, each by 25 basis points. The low-interest-rate environment is gradually taking shape, while the U.S. dollar index remains below 98.0 for consolidation. If the dollar index effectively breaks below the 98.0 key level, downside space will open, which could support commodities. More critically, loose liquidity combined with a weakening dollar will benefit China’s economic recovery. As one of the world’s largest energy consumers, China’s economic trends directly influence crude oil demand.

U.S. strategic shifts in AI suggest that liquidity conditions may remain ample through 2026. Elon Musk predicts that if AI applications are viewed as indicators of economic growth, the U.S. could achieve double-digit GDP growth within the next 12 to 18 months. The U.S. banking sector’s global research division also forecasts that next year, investors will gain clearer insights into how AI will reshape economic fundamentals, leading to stronger growth in both the U.S. and China. Optimistic expectations for China-U.S. trade negotiations and the U.S. debt dilemma also reinforce each other. Looking ahead to 2026, China’s economic recovery and a weaker dollar may become the strongest supports for oil prices.

Technical Turning Point Emerges, $59.0 as Key Breakthrough Level

Daily chart technical indicators show positive signals. Over the past two months, WTI crude has remained above $58.0. The Awesome Oscillator (AO) indicates that upward momentum is gradually strengthening. If WTI successfully breaks through the $59.0 round number, a rebound pattern could be established and expanded, with key resistance levels at $61.5 and $64.5.

Although WTI is currently under pressure due to oversupply expectations, the combination of Fed rate cuts, dollar depreciation, geopolitical volatility, and China’s economic recovery suggests that the oil market may be brewing a new upward cycle.