Are Crude Oil Markets Currently Showing Bullish Trends?

US-Venezuela Oil Dynamics: Market Impacts and Outlook

• The recent developments between the United States and Venezuela have resulted in the US gaining access to additional crude oil, which can now be processed domestically or sold internationally.

• Some analysts suggest that this influx could push up US crude oil prices, while potentially easing costs for gasoline and diesel over time.

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• Early in the week, both WTI and Brent crude oil markets appear poised for increased interest from noncommercial investors.

Assessing the US-Venezuela Oil Agreement

How will the agreement between the US and Venezuela influence both global Brent and domestic WTI crude oil markets? The US President recently announced that Venezuela would supply 50 million barrels of oil to the US, valued at approximately $3 billion. According to CNBC, the President also stated, “the money will be controlled by me…”

While these political moves are noteworthy, let’s set them aside for now and concentrate on how the structure of the crude oil market could evolve as we approach 2026.

Noncommercial Activity and Market Trends

Examining the noncommercial side, we can apply the principle that a market trend continues until disrupted by an external factor—often, the movement of investment capital. Reviewing WTI crude oil futures data from the CFTC’s Commitments of Traders report, we see that investment flows have remained steady. In early February 2018, funds held a net-long position of 739,100 contracts, including 862,100 long contracts. As of the week ending January 6, the net-long position had dropped to 57,352 contracts, down 7,239 from the previous week. This figure is close to the recent low of 39,800 contracts recorded on October 21, 2025. Such positioning could signal a potential shift, but investors typically require a compelling fundamental reason to change course, fueling debate over whether the current supply-demand balance for crude oil is turning bullish.

Fundamental Shifts: Heavy Crude and US Demand

A colleague from central Illinois recently questioned whether US crude oil fundamentals are becoming more bullish. The Venezuelan oil being sent to the US is heavy crude, which is ideal for Gulf Coast refineries and can be processed into gasoline and diesel. If the US continues to favor petroleum over renewable energy sources, demand for heavy crude could rise, potentially increasing crude prices relative to RBOB gasoline and distillate futures (such as diesel, jet fuel, and heating oil).

Global Supply, Demand, and Corporate Profits

However, if the US uses Venezuelan crude not only for domestic refining but also for export, global oil supplies will rise at a time when worldwide demand is declining. This may explain the subdued interest in WTI futures, even as energy company stocks surged last week. The reason? These companies now have open access to Venezuela’s extensive oil reserves, allowing them to utilize inexpensive local labor and ramp up production, thereby boosting profits.

Market Structure and Technical Signals

Despite the forward curves for both WTI and Brent showing backwardation through February 2027, I remain unconvinced that a bullish shift in fundamentals is underway. Nevertheless, if trading algorithms interpret the backwardated curve as a sign of bullish fundamentals, and with net-long positions near their recent lows, we could see renewed fund buying in crude oil. The market’s reaction could become clear soon after trading resumes Sunday evening, with last week’s 4-week high for WTI at $59.77 and Friday’s close at $59.12 (CLG26). Brent’s 4-week high stands at $63.91, with a Friday close of $63.34 (QAH26).

Potential for a Technical Rally

Should crude oil prices climb on the back of increased fund activity, despite weak fundamentals, the market could experience a “Rubber Band Disposition”—a scenario where prices eventually snap back to reflect underlying realities. But that’s a discussion for another time.

References

• Source: Dan Mangan, CNBC.com, January 6
• Market Principle: Fundamentals ultimately determine market direction.
• Technical Note: According to the 4-Week Rule, a new 4-week high signals a buy, while a new 4-week low signals a sell.