Crude Markets Face Pressure As Risk Premium Fades Across Different Energy Segments

Oil declined for a second consecutive session on Wednesday, with crude prices retreating following news of a U.S.-Venezuela oil export agreement that could deliver approximately $2 billion in Venezuelan crude to American refineries. Brent crude slipped 0.7 percent, settling at $60.29 per barrel, while West Texas Intermediate futures fell more than 1 percent to $56.53 as traders digested the implications of increased supply.

The Venezuela Deal and Market Skepticism

The Trump administration announced plans to facilitate the sale of between 30 and 50 million barrels of Venezuelan crude to U.S. markets at prevailing prices, with Energy Secretary Chris Wright overseeing the transaction proceeds. Despite the administration’s optimism about benefits for both nations, market participants expressed doubts about the deal’s practical impact on global crude dynamics. Experts questioned whether American oil firms possessed the technical capacity to rehabilitate Venezuela’s deteriorating production infrastructure, suggesting the expected supply boost may face implementation hurdles.

Mixed Signals From Inventory Data

Different types of fades emerged across various petroleum products when API released its weekly inventory assessment. U.S. crude stockpiles contracted by 2.8 million barrels during the week concluded January 2, typically a supportive factor for prices. However, the broader crude complex showed weakness as gasoline inventories swelled by 4.4 million barrels, and distillate reserves—encompassing diesel and heating oil—climbed 4.9 million barrels within the same timeframe. This divergence in inventory trends, where refined product stockpiles expanded even as crude supplies tightened, contributed to the overall bearish sentiment dominating energy markets and reinforced the fading of risk premiums that had previously supported crude valuations.