WTI crude oil prospects darken following Venezuelan supply announcement, pushing quotes toward $55.70

U.S. crude oil faces a second consecutive day of selling pressure this Wednesday, declining significantly from its weekly highs. WTI prices have fallen toward the $55.70-$55.65 range, marking their lowest levels since December 19, with clear signs of further weakness on the horizon.

Venezuelan supply promises transform market dynamics

The outlook for crude has changed dramatically following Tuesday’s presidential announcements. Donald Trump confirmed that Venezuela would commit to delivering between 30 to 50 million barrels of high-quality oil to the United States, an agreement ratified by interim President Delcy Rodríguez, who expressed willingness to cooperate with Washington.

This news has substantially reshaped market expectations. The possibility of Washington expanding access to Venezuelan oil volumes generates optimism about adequate global supply, a factor that diminishes previous concerns about supply restrictions. The psychological impact on traders has been significant, fueling pessimism about future crude prices.

Insufficient inventory data to counteract downward inertia

U.S. inventory statistics have failed to reverse the prevailing negative sentiment. According to the American Petroleum Institute, crude oil reserves in the U.S. contracted by approximately 2.8 million barrels during the week ending January 2. Surprisingly, this stock reduction has not provided the expected support to buyers.

The official government inventory report will be released later during the U.S. session on this Wednesday, possibly offering additional nuances. However, the context of expanded supplies from Venezuela has overshadowed any bullish signals these data might convey.

Macroeconomic factors and dollar weakness as secondary elements

Traders awaiting U.S. economic indicators expect the ADP private employment report, ISM Services PMI, and JOLTS job openings to provide additional momentum during U.S. trading. However, these data seem to play a subordinate role compared to the magnitude of the supply expectation adjustment.

The U.S. dollar remains weak, unable to capitalize on previous positive movements. This weakness in the dollar would normally support demand for commodities priced in USD, providing a limited cushion against further declines in oil prices. However, even this technical support is insufficient to counteract the severity of the structural change in supply dynamics.

Geopolitical risks: a factor sidelined by supply optimism

Rising geopolitical tensions between Saudi Arabia and the United Arab Emirates, stemming from friction in Yemen, have had the potential to cause supply chain disruptions. However, this risk has been relegated in the market’s hierarchy of concerns compared to the outlook of expanded access to Venezuelan volumes.

The technical resistance zone around $56.00 represents a critical defense level to prevent further weakening. Its breach would project greater vulnerability toward new lows, consolidating the dominance of the sellers in upcoming trading sessions.