Brent crude oil rose 5% to a two-week high due to concerns about the situation in Venezuela and supply.

**Source**: Wall Street Insights

**Author**: Bao Yilong

Despite the U.S. plan to sell 50 million barrels of Venezuelan crude oil, geopolitical risks drove oil prices higher. Technical support for the market was evident: commodity trading advisors (CTAs) held a massive 91% short position in WTI crude, meaning a price rally could trigger a wave of short covering. In addition, the annual rebalancing of commodity indices was expected to bring capital inflows, and the strengthened skew of call options indicated that traders were ramping up hedging activities.

International oil prices rebounded from two consecutive days of declines on Thursday, with Brent crude surging as much as 5% intraday to hit a two-week high.

Although the U.S. planned to sell up to 50 million barrels of Venezuelan crude to domestic refiners, and U.S. gasoline and distillate inventories climbed, investor assessments of the evolving situation in Venezuela and concerns over supply disruptions in Russia, Iraq and Iran pushed prices upward.

On Wednesday local time, U.S. Energy Secretary Chris Wright stated in a media interview that Chevron is expected to rapidly expand its operations in Venezuela, while ConocoPhillips and ExxonMobil are also seeking to play a constructive role. However, energy consulting firm Ritterbusch and Associates pointed out:

*It could take years for substantial volumes of Venezuelan crude to flow into the U.S. Gulf Coast region.*

The market also remained focused on supply risks in other major oil-producing countries. Reports indicated that an oil tanker bound for Russia was attacked by a drone in the Black Sea; Iraq is moving ahead with the nationalization of the West Qurna 2 oilfield following U.S. sanctions on Russia’s Lukoil; and Iran has imposed an internet shutdown amid nationwide protests sparked by economic woes.

Brent crude futures settled $2.03 higher at $61.99 a barrel on Thursday, a 3.4% gain that marked the highest closing price since December 24 last year. WTI crude futures rose $1.77, or 3.2%, to $57.76 a barrel.

### Rising Geopolitical Risks

Trump’s tough stance on Iran emerged as another factor lifting oil prices.

According to CCTV News, President Trump threatened that the U.S. would strike Iran "strongly" if the Iranian government kills protesters amid the ongoing unrest in the country.

Any tangible action against Iran amid the persistent turmoil could disrupt the country’s oil supplies. For a market currently bracing for a supply surplus, an outage in Iranian output would constitute an unexpected supply-side shock.

Technical factors also underpinned the oil price rally. Data from Bridgeton Research, a unit of Kpler, showed that trend-following CTAs held a 91% short position in WTI crude. This positioning implies that a sharp price surge could force traders to cover their short positions rapidly.

Furthermore, the annual rebalancing of commodity indices was expected to channel capital back into the crude market in the coming days, providing additional price support. The skew of call options on Brent crude also strengthened, with traders flocking to the options market to hedge their positions.

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