The oil market saw an increase as early-morning trading reflected concerns over Iran’s escalating unrest, potentially affecting supply. With Iran producing around 3.2 million barrels per day, any disturbance could impact the market. Geopolitical tensions further influence crude prices as Ukraine continually targets Russian energy infrastructure, including LukOil platforms in the Caspian Sea. Potential US sanctions on Russian energy add to market uncertainty, despite the White House seeking negotiation flexibility.
ExxonMobil Strategy and Venezuela
ExxonMobil’s CEO dismissed the possibility of investing heavily in Venezuela due to current conditions. Other producers are considering increasing Venezuelan oil output in the future, yet past expropriation issues pose challenges. The US may lift some sanctions against Venezuela this week to help with oil sales. Changes in market positioning show speculators reduced their net long in ICE Brent by 3,219 lots to 122,965, indicating market uncertainty. There was an increase in both gross long and short positions, reflecting concerns over developments in Venezuela.
With Brent crude pushing towards $88 a barrel, we are seeing a significant geopolitical risk premium being priced into the market. The escalating unrest in Iran is a major concern, as any disruption to its 3.2 million barrels per day of production could severely tighten global supply. This situation, combined with ongoing tensions, suggests upside risk will dominate trading decisions in the near term.
The persistent Ukrainian attacks on Russian energy infrastructure, which we saw throughout 2025, continue to be a key factor. While Russian seaborne exports have proven surprisingly resilient, recently averaging around 3.4 million barrels per day, the threat of new US sanctions targeting importers of Russian oil creates a major wildcard. We must therefore watch for any legislative momentum in Washington, as this could be more disruptive than the physical attacks have been.
Venezuelan Market Signals and Global Implications
On the other hand, the market is facing conflicting signals from Venezuela, which could cap any major rally. While some producers remain skeptical about investing there, the possibility of the US easing sanctions this week could bring more barrels to the market faster than expected. Analysts estimate that an initial 300,000 barrels per day could come online within six months of sanctions being lifted, providing a crucial bearish counterpoint.
This uncertainty is reflected in how we saw money managers position themselves late last year, when they reduced their net bullish bets. That caution seems justified, as the bullish supply risks from Iran and Russia are being weighed against potential new supply from Venezuela and broader economic concerns. Given the conflicting headlines, we should expect implied volatility to remain elevated, making options strategies attractive for managing the potential for sharp price swings in either direction.
