Maduro ‘Wins’ Election, Spells Continued Trouble for Venezuelan Crude

Market Overview

Maduro has won another term as president amidst accusations of vote rigging. During Maduro’s tenure, Venezuelan oil production fell roughly 40% to recent lows of 1.5 million. The drop in production has offered sustained support for global crude oil prices and Maduro’s victory looks to maintain the trend. Additionally, President Trump issued a new round a sanctions against Venezuela that prohibits US companies from buying any Venezuelan debt that has ties to the oil industry. The move takes away another source of capital for Venezuela and pushes the oil industry one step closer to failure.

Despite support from Venezuela, crude oil prices could be facing strong headwinds as July Brent trades near OPEC’s target of $80 per barrel and just shy of Goldman’s forecast of $82.50. Barring any major changes in supply, OPEC could start pumping the breaks over the short-term.

Technical Analysis

WTI Futures

The technical bias remains higher, but we are looking for a round of profit taking to enter the market. If headlines remain flat this week, we expect price to push lower as some of the risk premium begins to fade. Price is in no-man’s land with the closest resistance between $75 and $80 from 2011 and 2012 lows.

ULSD Futures

Price is challenging technical sellers at upper channel resistance and round-number resistance at $2.30. Highs at $2.35 formed during the winter of 2014/15 offers the nearest level of tangible resistance. $2.15 should offer support on any technical selling.

RBOB Futures

RBOB crossed above resistance at $2.20 formed in the summer of 2015 and looks poised for further gains into driving season. As with WTI, we’d prefer to see a pullback toward more reasonable levels. RBOB has a good line of support between $2.09 and $2.10. We’ll need to see a test and hold of support at $2.20 to confirm its validity.

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