Oil Prices Slump from Early Risk Premium

Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)

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Summary

Fundamentals returned to influence the direction of crude oil prices after escalating tensions between the U.S. and Venezuela. An oversupply situation may be muting geopolitical risk.

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Oracle Drags Market Lower

Crude oil prices on Thursday were in retreat after AI computing giant Oracle Corporation (Austin, Texas) expressed concerns about the sector, erasing some of the geopolitical risk premium from U.S. tensions with Venezuela.

"There are going to be a lot of changes in AI technology over the next few years, and we must remain agile in response to those changes," said Oracle Chairman Larry Ellison.

Though most metrics for the company showed substantial gains relative to year-ago levels, there are concerns about a bubble in AI cloud computing business and a massive debt burden from the data centers required to support the advanced technology. For related information, see October 13, 2025, article - Data Centers: Is the Buildout Starting to Become a Bubble?

In short, data centers are gobbling up energy, and if AI takes a hit, it could have an impact on the broader energy markets.

Shares in Oracle were down more than 13% in early Thursday trading, dealing a blow to broader markets. The tech-heavy NASDAQ was down about 1% early in the session. West Texas Intermediate, the U.S. benchmark for the price of oil, was trading around $57.40 per barrel as of 11 a.m. EST, down some 2% from Wednesday.

Vessel Seizure in a Bloated Market

Support early in the week came after the U.S. Coast Guard seized what could be a Very Large Crude Carrier (VLCC), capable of carrying around 200,000 barrels of oil, off the Venezuelan coast. With heavy sanctions from the U.S. government, the vessel was carrying crude oil to Cuba, a major destination for Venezuelan crude oil shipments.

"We've just seized a tanker on the coast of Venezuela, a large tanker, very large, largest one ever seized, actually," President Donald Trump told reporters on Wednesday.

Iranian tankers have been seized in the past. The market reaction to U.S.-Venezuelan tensions was brief, however, as market watchers shifted their attention to the central bank activity and broader fundamentals.

"The boarding of a Venezuelan vessel by the U.S. Coast Guard and members of its law-enforcement agencies ought to have caused more than an overnight spike in prices," wrote John Evans, an analyst at London oil broker PVM, in a Thursday newsletter. "But one vindictive action brought on by the spite shown toward Caracas by Washington under the guise of sanction enforcement is not enough to quell the narrative of a market that just has too much oil on the water."

Sanctions, dilapidated energy infrastructure and a shortage of resources of the diluent necessary to move Venezuela's heavy Merey crude oil grade create headwinds for one of the founding members of the Organization of the Petroleum Exporting Countries (OPEC).

It's heavy crude oil, however, has found a destination in the U.S. refining sector, which prefers heavier slates relative to the light, sweet crude oil found in shale basins. During the seven-day period ending Dec. 5, the U.S. economy took in 193,000 barrels per day (BBL/d) of Venezuelan crude, making it the fourth-largest exporter behind Saudi Arabia for that week.

By the Numbers

• 3.2%: Slump in WTI so far this month
• 193,000 barrels per day: Venezuelan crude imported by U.S.
• 13%: Slump in Oracle shares

Reaction to U.S. Fed Decision

Elsewhere, broader markets may still be digesting the rate move from the U.S. Federal Reserve, which lowered its lending rate by 25 basis points to around 3.5%, though it was met with dissent by some bank governors who wanted more.

"Job gains have slowed this year, and the unemployment rate has edged up through September," the Federal Reserve stated Wednesday. "More recent indicators are consistent with these developments."

Commodity prices were volatile after the announcement given the fluctuations in the U.S. dollar. The value of the U.S. dollar has an inverse relationship to the price of crude oil.

In broader terms, a weakened global economy, brought on in large part by an aggressive U.S. tariff policy, has weighed on commodity prices so far this year. For just December, WTI is down around 3.2%.

Key Takeaways

• Fundamentals overtook geopolitical risk for crude oil.
• An oversupplied market means a seized VLCC doesn't equate to much.
• Fed pointing to softer markets ahead.

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