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The Energy Report

Phil Flynn
http://www.pricegroup.com/
pflynn@pricegroup.com


Shunning Barrels. The Energy Report 01/06/2026

After the successful military operation to remove Venezuelan dictator Nicolas Maduro, apparently now China is suddenly not so keen on buying Venezuelan oil. This comes as the Trump administration meets with executives of the US oil and gas industry. President Trump has said they are the “biggest anywhere in the world” and would invest billions of dollars to repair and upgrade Venezuela’s “badly broken” oil infrastructure, “a total bust” enabling a rapid increase in production and revenue generation for the people of Venezuela as well as for the US oil companies that unjustly had their property sized without compensation.

And it appears that President Trump, during the transition, may try to work at least temporally with Nicolás Maduro’s number 2 and so-called President Delcy Rodríguez who according to Bloomberg has long been the go-to contact for senior US Oil executives. She impressed them by navigating Venezuela‘s industry through international sanctions, economic pressures, and internal mismanagement. Her loyalty to the Maduro regime notwithstanding, she’d be best positioned to shepherd through the US plan to restore Venezuela to its glory days as an oil gusher, argued executives and lobbyists. Even though the Trump administration wants the Venezuelan government back to the Venezuelan people, he doesn’t want to make the same mistake the Bush administration did when they toppled Saddam Hussein by kicking out the Arab Socialist Ba’ath Party – leaving the power void and the inability to make the infrastructure work which led to a lot of bigger problems down the road.

And seeing that Venezuela can’t even keep the lights on, it may be best to work with Rodriguez through the transition so the US oil industry can revitalize the industry and hopefully work to help keep Venezuela’s lights on.

US energy companies do have a financial interest because Venezuela stole billions of oil royalties and equipment. So, forget those who are whining that the US is stealing Venezuelan oil, the opposite is true. In 2007 the Hugo Chavez regime decided to rewrite contracts with the oil companies. While firms like Chevron accepted the new terms and remained as minority partners, others refused. ExxonMobil and ConocoPhillips abandoned their multibillion-dollar investments rather than accept minority status, leading to the total seizure of their Venezuelan holdings. Venezuela sized their rights as government revoked the “operational control” companies held over massive crude projects, effectively ending the 1990s “oil opening” policy.

Then in 2009, Chávez expanded nationalization of the oil service sector to address PDVSA’s growing debts to contractors. The government seized firestone and equipment and physical assets including 300 boats, dozens of docks, and various transportation installations. They took over three gas compressor facilities belonging to the U.S.-based Williams Companies (valued at approximately $324 million) and drilling assets from oil field service providers such as Helmerich & Payne, Baker Hughes, and BJ Services were also targeted or impacted by the state’s refusal to pay and subsequent expropriation.

So the markets today will be watching this meeting as President Trump says that, “all of our oil companies are ready and willing to make big investments” rebuilding Venezuela infrastructure and making Venezuela oil great again. And I’m sure there will be some discussion about Venezuela’s massive gold reserves as well as their rare earth minerals, another potential to development of these commodities that the world needs.

Bloomberg News highlights a dynamic shift in the global oil market this week, as Chinese buyers are strategically pausing on Venezuelan crude purchases amid the heightened US blockade. This has led to notable changes in pricing and export activity. Venezuela’s popular Merey crude was recently offered at a $13 per barrel discount to ICE Brent—slightly less than last month’s $15 discount prior to the US’s increased sanctions on tankers, according to sources who requested anonymity due to the sensitive nature of the information.

The data compiled by Bloomberg shows that shipments of Venezuelan oil headed to China dropped last month as the naval blockade intensified, prompting sellers to adjust their offers for Merey crude. China remains the top buyer of Venezuelan oil, with Merey often serving as a vital component for road paving across the country. Thanks to a milder construction outlook and robust crude reserves held by Chinese refiners, buyers are in a strong position to wait for more favorable deals before reentering the market.

In addition, Chinese buyers are well-insulated from supply shocks, as nearly 82 million barrels of sanctioned oil—including Venezuelan—are currently stored on tankers off the coasts of China and Malaysia, according to the intelligence firm Kpler. This substantial floating inventory provides a solid cushion and keeps options open, even if US actions further restrict Venezuelan oil flows.

Venezuelan oil exports fell to a 17-month low in December amid a US naval blockade. Those restrictions remain in place, leaving ships holding 7.33 million barrels unable to depart for their final destination in China.

There is more concern that if the blockade of Venezuelan oil exports continue, that Venezuela would have to cut back production because there’s no place to store the oil. One would assume after the meeting today with oil executives there will be some way to start moving some of that oil into the marketplace or even a potential purchase for the Strategic Petroleum Reserve here in the US to help Venezuela. There is precedent for the US government buying oil for the US strategic reserve to help prop up a country in transition. When Bill Clinton was in office and Russia was struggling after the fall of the Berlin Wall, the Clinton administration made a purchase for the Strategic Petroleum Reserve to give the Russian government and President Boris Yeltsin some badly needed cash. The Clinton administration sold that oil back to the market.

As far as the West TX intermediate, crude oil contracts they were basically unmoved on the news after initially opening lower on Sunday night. The market then mounted a rally on a strong stock market and increasing demand expectations but really failed to make any sizable move either up or down. Yet the optimism about this operation was clearly in the stock market and the oil stocks would have a very impressive day. It seems to us there is plenty of good money to be made in rebuilding Venezuela at least the potential for a massive industrial revolution that can revitalize not only the country of Venezuela but the entire hemisphere. Call Phil Flynn at 888-264-5665 to get involved.

Natural gas collapsed along with the la Nina weather system and the temperature forecasts that seemed to suggest that we could get a more market and less winter. Yes, spring already sprung. EBW Analytics say that while slumping weather may amplify bearish technicals to produce still-lower pricing, production readings are lower to open 2026 while mid-January could feature a colder transition. If demand does not shift soon, however, it may be be too little, too late for NYMEX futures. Fox Weather says that the first cross-country storm of 2026 is brewing, and is expected to bring rain to millions, as well as the threat of severe weather to the Deep South and even some snow across the Upper Midwest. developing storm out of the West could impact most of the country by the end of the week, according to the FOX Forecast Center.

Stormy conditions will break out in the Southwest on Thursday as a cut-off area of low pressure, currently stalled over the Pacific, will be picked up by the jet stream and move into the Rockies. A cutoff low is an area of upper-level energy that has become separated from the main jet stream, leaving it stuck in place until the jet stream nudges it forward or reabsorbs it, according to the FOX Forecast Center.

Download the Fox weather app to keep up with the latest on this breaking weather development and to see if the cold returns in late January. Stay tune to Fox Business. While you’re at it you can also call me at 888-264-5665 or e-mail me at pflynn@pricegroup.com if you have any questions or if you’re ready to open your account.



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Phil is one of the world's leading energy market analysts, providing individual investors, professional traders and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline and energy markets. Phil's market commentary, fundamental and technical analysis, and long-term forecasts are sought by industry executives, investors and media worldwide.

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Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Alaron Trading Corp. its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

Contact Phil at 1-888-264-5665 or pflynn@pricegroup.com.