Oil prices retreated during Asian and European trading hours on Monday, only to surge again in the latter part of the night session following remarks from Donald Trump, with the volatility rhythm entirely focused on U.S. actions. Since the start of the new year, a series of rule-breaking measures by the Trump administration have sparked global unease. From the latter half of last week, market attention gradually shifted from Venezuela to the domestic unrest in Iran and the external provocations by the U.S. and Israel. Based on weekend developments, Iran claimed its security forces had "complete control" over the domestic situation, and the UAE resumed flights to Iran on Monday, which somewhat cooled market concerns, leading to a fluctuating decline in oil prices during Asian and European hours. However, prices rebounded again during the night session after U.S. President Trump threatened potential intervention, stoking fears that U.S. military action could ignite Middle Eastern geopolitical risks. Reports indicated Trump indeed leans towards military action, and just before dawn, Trump announced a 25% tariff on all countries engaging in commerce with the Islamic Republic of Iran, further heating up market worries about the Iran situation. Consequently, oil prices surged again on Monday from their earlier decline, continuing to rise after the official settlement.
It is evident that geopolitical factors have rapidly become the market's focal point at the beginning of the year, dominating the short-term fluctuations in oil prices. A series of measures, including the Trump administration's forceful intervention in Venezuelan oil at the start of the new year, have enhanced U.S. control over key petroleum resources. While these actions do not immediately cause a crude shortage, they inject disruptive political risk into the global oil market. The ongoing Iran issue is a risk point that worries the market even more. Trump's expansionist measures have introduced significant "political uncertainty," creating unease and raising the risk of potential cost increases for other oil-consuming nations. U.S. Secretary of the Interior, speaking of a perceived historic shift, suggested that the influence of OPEC will be weakened.
In terms of the actual supply and demand fundamentals of the crude market, supply remains ample, and the physical market in the Middle East continues to show weakness. Nevertheless, geopolitical factors are clearly adding a risk premium to oil prices. Alongside the price rebound, the Brent crude forward curve has shown a noticeable recent rebound. Ultimately, the extent of the price surge will depend on the direction of the Iran situation. The market outlook remains characterized by significant uncertainty and high volatility. At this stage, prioritizing risk management is crucial, followed by the identification of opportunities, with careful attention to market rhythm.
Daily Market Movements WTI crude futures rose $0.38, or 0.64%, to settle at $59.5 per barrel; Brent crude futures gained $0.53, or 0.84%, to settle at $63.87 per barrel; INE crude futures edged down 0.07% to close at 435.4 yuan. The U.S. dollar index fell 0.23% to 98.9; the Hong Kong Exchange USD/CNY rate fell 0.18% to 6.946; the U.S. 10-year Treasury yield was unchanged at 112.23; the Dow Jones Industrial Average rose 0.17% to 49,590.2.
Recent Key Developments In the competition for control over Venezuelan crude oil, global commodity traders Vitol and Trafigura have emerged as early winners, outpacing cautious U.S. oil giants to seize potential profit opportunities from the country holding the world's largest crude reserves. The U.S. government chose to partner with major traders because they can restart the flow of Venezuelan oil exports more quickly, a primary objective for Washington before reconstruction begins, ensuring export revenues under U.S. supervision can fund the interim government. Trafigura and Vitol have obtained preliminary special licenses to negotiate and export Venezuelan crude, with Trafigura expected to load its first cargo this week. The key advantages for traders winning contracts lie in their global sales networks, fleets, logistical capabilities, higher risk tolerance, and greater operational agility compared to large publicly-listed oil companies. Legal risks are a primary reason for the hesitation of U.S. giants, with advisors concerned that Venezuela's creditors might take legal action in the U.S. or elsewhere to seize oil sales proceeds for debt repayment. The U.S. government has promised trading companies protection by controlling relevant sales bank accounts and safeguarding proceeds from creditor seizure, with Trump signing an executive order to provide legal backing. Another obstacle is transportation; many tankers in the "shadow fleet" involved in sanctioned oil trade are old and lack compliant insurance and safety certificates, failing to meet the strict chartering requirements of major U.S. oil companies. The substantial investments of U.S. oil companies in China might also make them cautious about deep involvement in short-term oil trade, as China is a major creditor and crude buyer from Venezuela and has condemned U.S. actions. U.S. giants like ExxonMobil have clearly stated that Venezuela currently "lacks investment merit" until security guarantees and hydrocarbon law reforms are obtained, highlighting the starkly different risk considerations between long-term investment and short-term trade. This contest reveals new dynamics in global energy trade amid geopolitical shifts: agile, high-risk-appetite traders are leveraging their network advantages to seize initial control and profits from key resources while giants hesitate due to compliance, legal, and reputational risks.
On the 12th, Iranian Foreign Minister pointed out that since December 28, peaceful demonstrations initially led by industry associations and economic figures in Iran gradually spiraled out of control in subsequent days as new groups joined. He stated that since January 8, terrorists and armed groups carrying weapons infiltrated the protests, opening fire on police and civilians in an attempt to push the situation towards violence and bloodshed. He also emphasized that substantial evidence indicates U.S. and Israeli involvement in the unrest. The White House is weighing proposals from Iran regarding nuclear negotiations, while Trump, in this context, leans towards striking Iran. U.S. Vice President urged Trump to attempt diplomatic engagement with Iran. Trump is studying Iran's negotiation proposal and has not yet made a final decision on Iran. A White House spokesperson stated the world will have to wait patiently—only the President himself knows what action he will take regarding Iran. Latest reports indicate Trump announced on social media that any country conducting business with the Islamic Republic of Iran must pay a 25% tariff on all commercial activities with the United States. On the evening of January 11 EST, U.S. President Trump posted on a social platform calling himself "Acting President of Venezuela." In response, Venezuela's Acting President emphasized in a public address on January 12 local time that "only the Acting President and a president forcibly controlled by the United States" are governing Venezuela, adding that the Venezuelan government is co-governing with organized citizens and defending Venezuela's rights by establishing international relations based on respect and international law. Previously, in the early hours of January 3 local time, the U.S. launched a military operation against Venezuela, forcibly taking control of President Maduro and his wife and relocating them abroad. On January 5, the then-Vice President of Venezuela was sworn in as Acting President. The U.S. Secretary of the Interior stated he believes a historic shift is underway, and OPEC's influence will be weakened.
A senior EU defense official stated on the 12th that the EU could provide security support to Greenland if Denmark requests it, warning that if the U.S. seizes Greenland by military means, it would mean NATO is "heading towards its end." U.S. President Trump warned that if the Supreme Court rules U.S. tariffs invalid, it could trigger debt repayment situations amounting to hundreds of billions or even potentially trillions of dollars, which he described as an unbearable fiscal burden for the U.S. He also stated that canceling tariffs would be a "national security disaster" and claimed the U.S. cannot compensate for economic losses nor reimburse affected countries and companies.
Middle Eastern crude benchmarks Oman and Dubai weakened on Monday as traders assessed Iran's supply prospects and efforts to restore Venezuelan oil exports. Price pressure partly stemmed from Iran's claim of having "complete control" over the weekend's domestic situation, easing short-term market worries about supply disruptions from this OPEC producer. Indian refiner HPCL purchased 2 million barrels of Khafji and Upper Zakum crude via a tender, awarded to Aramco Trading, indicating physical demand persists. The spot Dubai discount to swaps widened by 10 cents to -37 cents per barrel, suggesting relatively ample immediate supply. Goldman Sachs noted in a report that although geopolitical risks related to Russia, Venezuela, and Iran will continue to drive volatility, this year's wave of supply could lead to a market surplus, potentially pushing prices lower. U.S. President Trump said on Sunday he might block ExxonMobil from investing in Venezuela, adding political uncertainty to the prospects of restoring the country's production capacity. Reports indicate that oil companies aiming to participate in Venezuela's new crude exports are hastily seeking tankers and organizing operations to safely transport crude from the country's dilapidated ports, highlighting the significant practical challenges that remain. Overall, the crude market is in a complex balance: frequent geopolitical events provide premium support on one hand, while structural supply growth and expectations of export recovery from some producers create downward pressure on the other. Traders need to closely monitor export data and political movements in specific countries.
