LCRUDE: Marco Rubio and the New Oil Sanctions
President-elect Donald Trump's nomination of Marco Rubio as Secretary of State anticipates a tougher foreign policy toward Iran and Venezuela, with potentially significant impacts on the global oil market. Rubio, known for his tough stance on international policy issues, could strengthen existing sanctions, seeking to limit crude oil exports from these countries. However, the risks of retaliation by China and the impact on the international financial system could moderate these initiatives.
Iran: A More Restrictive Approach
During Trump's first term, sanctions drove Iranian oil exports to historic lows. Under Biden, these have increased due to laxer enforcement and growing demand from China, the main buyer of Iranian crude. Rubio could intensify pressure on Iranian exports, especially those destined for the Chinese market, using tools such as the SHIP Act of 2024, which penalizes ports and refineries that process Iranian oil in violation of U.S. sanctions.
Venezuela: Continued Confrontation
Rubio's arrival at the State Department also indicates little chance of improving U.S.-Venezuela relations. His critical stance toward President Nicolás Maduro reinforces the likelihood of maintaining and even tightening sanctions against the Venezuelan oil sector. This approach aligns with a confrontational policy aimed at limiting the South American country's economic options.
Geopolitical Challenges: The Role of China
A tightening of sanctions could generate tensions with China, which has increased its dependence on Iranian crude. As a major buyer, China could respond by reducing the use of the dollar in oil transactions, weakening its global primacy and complicating U.S. foreign policy objectives.
LCRUDE Technical Analysis
The value of crude oil reached several downward ceilings, the first in March 2017, the second in June 2022, the third in September 2023, and the last April 2024. From that point on the trend on crude has been downward regardless. Focusing the chart on the last period from September to this part, crude oil has had several attempts without much strength to return to the Checkpoint value around $78.00 in October. The crossover of averages indicates a bearish continuation with the 50-average below the 100 and 200. So this only presents a confirmation to the shoulder head shoulder we have before us and could generate the price to test the minimum resistance at $64.72, and if the market does not support a price recovery the price of oil could continue to depreciate irretrievably. The strategy of lowering crude oil prices in general seems more of a political move than a healthy market correction. The volume average appears to be slightly below 126k. The RSI is oversold at 41.46% so this could be a further confirmation of the bearish continuation. Looking at the chart the resistance zone tested for the third time today is at $66.77 if the low is reached as we say, we could see a stronger price drop.
Final Reflection
The Trump administration, with Rubio at the helm of diplomacy, faces the challenge of balancing its strategic objectives with the economic and geopolitical risks of a more aggressive sanctions policy. This approach will set the tone for international relations in a context where the energy market and global dynamics are more interconnected than ever.
Ion Jauregui - ActivTrades Analyst
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The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and such should be considered a marketing communication.
All information has been prepared by ActivTrades ("AT"). The information does not contain a record of AT's prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.
Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acing on the information provided does so at their own risk.
Iran: A More Restrictive Approach
During Trump's first term, sanctions drove Iranian oil exports to historic lows. Under Biden, these have increased due to laxer enforcement and growing demand from China, the main buyer of Iranian crude. Rubio could intensify pressure on Iranian exports, especially those destined for the Chinese market, using tools such as the SHIP Act of 2024, which penalizes ports and refineries that process Iranian oil in violation of U.S. sanctions.
Venezuela: Continued Confrontation
Rubio's arrival at the State Department also indicates little chance of improving U.S.-Venezuela relations. His critical stance toward President Nicolás Maduro reinforces the likelihood of maintaining and even tightening sanctions against the Venezuelan oil sector. This approach aligns with a confrontational policy aimed at limiting the South American country's economic options.
Geopolitical Challenges: The Role of China
A tightening of sanctions could generate tensions with China, which has increased its dependence on Iranian crude. As a major buyer, China could respond by reducing the use of the dollar in oil transactions, weakening its global primacy and complicating U.S. foreign policy objectives.
LCRUDE Technical Analysis
The value of crude oil reached several downward ceilings, the first in March 2017, the second in June 2022, the third in September 2023, and the last April 2024. From that point on the trend on crude has been downward regardless. Focusing the chart on the last period from September to this part, crude oil has had several attempts without much strength to return to the Checkpoint value around $78.00 in October. The crossover of averages indicates a bearish continuation with the 50-average below the 100 and 200. So this only presents a confirmation to the shoulder head shoulder we have before us and could generate the price to test the minimum resistance at $64.72, and if the market does not support a price recovery the price of oil could continue to depreciate irretrievably. The strategy of lowering crude oil prices in general seems more of a political move than a healthy market correction. The volume average appears to be slightly below 126k. The RSI is oversold at 41.46% so this could be a further confirmation of the bearish continuation. Looking at the chart the resistance zone tested for the third time today is at $66.77 if the low is reached as we say, we could see a stronger price drop.
Final Reflection
The Trump administration, with Rubio at the helm of diplomacy, faces the challenge of balancing its strategic objectives with the economic and geopolitical risks of a more aggressive sanctions policy. This approach will set the tone for international relations in a context where the energy market and global dynamics are more interconnected than ever.
Ion Jauregui - ActivTrades Analyst
*******************************************************************************************
The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and such should be considered a marketing communication.
All information has been prepared by ActivTrades ("AT"). The information does not contain a record of AT's prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.
Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acing on the information provided does so at their own risk.
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