The prospect of reviving Venezuela's vast but dormant oil industry introduces significant potential for increased global supply. Morgan Stanley suggests this could suppress prices in the medium-term, a counter-intuitive outcome where resolving geopolitical tension leads to lower commodity prices rather than higher ones.

Despite new US sanctions on Russian oil producers, Goldman Sachs remains bearish, forecasting a decline. They argue that spare capacity from OPEC, exemptions for buyers, and the reorganization of trade networks will mitigate any supply disruption, preventing a sustained price spike and leading to lower prices by 2026.

Following recent conflicts and internal unrest, the Iranian stock market is driven by overwhelming fear rather than fundamentals. The median price-to-earnings ratio has fallen below three, near all-time lows. This indicates that investors are pricing in a constant state of extreme geopolitical risk, creating a uniquely distressed market.

The oil market's lack of reaction to the events in Venezuela demonstrates a key principle: short-to-medium term prices are driven by current production and delivery capacity, not the theoretical size of underground reserves that may take years and billions to develop.

Despite major political upheaval in Venezuela, the oil market's reaction is minimal. This is because the short-term supply impact is ambiguous, with an equal probability of production increasing through U.S. re-engagement or decreasing due to intensified blockades, creating a balanced risk profile.

Trump's actions are guided by a political balancing act. Research shows negative media mentions spike when gasoline exceeds $3.50/gallon. Conversely, crude below $50-$60/barrel hurts his producer base. This creates a "parabola of political price pressure," incentivizing him to keep prices within a politically safe band.

The crude oil market is trapped in a recurring monthly pattern. For the first half of each month, the forward curve weakens on fears of a supply glut, nearly flipping into contango. Then, a sudden geopolitical shock mid-month causes the curve to snap back into pronounced backwardation, delaying the surplus.

The primary impact of U.S. sanctions on Russian oil is not a reduction in supply but a compression of profit margins. Russia is forced to offer deeper discounts, estimated at $3-$5 per barrel below pre-sanction levels, to compensate buyers for increased logistical and financial risks, ensuring export flows remain stable.

Despite his stated goal of lowering oil prices, President Trump's aggressive sanctions on Venezuela, Iran, and Russia have removed significant supply from the market. This creates logistical bottlenecks and "oil on water" buildups, effectively tightening the market and keeping prices higher than they would be otherwise.