As emphasized in the newly published National Security Strategy, President Donald Trump’s administration has placed renewed focus on maintaining influence and control in Latin America. Washington’s growing pressure on Venezuela is a clear expression of this new foreign-policy doctrine, with the recent seizure of an oil tanker off the Venezuelan coast marking the latest escalation. Against this backdrop, it is important to understand how the country’s oil sector has become part of a larger geopolitical contest.

Since the United States imposed sanctions on Venezuelan crude in 2015, the country’s oil production has deteriorated dramatically. Years of declining oil revenue caused a massive drop in investment in energy infrastructure, meaning that even a full lifting of sanctions would make it extremely difficult to revive output to anything resembling its “glory years.” Nonetheless, some relaxation of sanctions in recent years allowed Venezuela to lift production noticeably. However, the latest escalation from the White House — including strikes on suspected drug-smuggling boats and the seizure of a tanker — has injected new uncertainty into the outlook for Venezuelan output.

Venezuela holds the largest oil reserves in the world, yet today contributes just 1% of global supply. The country accounts for roughly 17% of global proven reserves, with more than 300 billion barrels. By comparison, the United States holds about 81 billion barrels. In the mid-1990s, Venezuela produced around 5% of the world’s oil.

But years of mismanagement, under-investment, and U.S. sanctions caused production to collapse. The extremely heavy nature of Venezuelan crude also makes extraction costly and technically complex. With U.S. sanctions still in place, most Venezuelan oil now flows to China through “shadow fleets,” allowing both countries to circumvent restrictions.

In recent months, the Trump administration has expanded its military presence near Venezuela. Trump ordered the destruction of several small boats in the region, accusing those onboard of trafficking drugs for major cartels. The administration said U.S. forces have killed at least 87 people in 22 acknowledged strikes in the Caribbean and eastern Pacific since early September. This marks the largest U.S. military presence in Latin America in decades, prompting speculation that ground operations could be the next step.

In December, Venezuelan President Nicolás Maduro claimed the real motivation behind U.S. military action was oil, a charge the U.S. State Department quickly denied. Colombian President Gustavo Petro agreed with Maduro’s assessment, saying the three-month military campaign against Caracas amounted to nothing more than “oil negotiations.” Petro added that Trump “is not thinking about Venezuelan democracy, and not even about drug trafficking.”

Trump has made his position on Maduro clear, pushing openly for regime change. In late November, reports indicated that Trump gave Maduro a deadline to step down. Maduro reportedly demanded “global amnesty” for himself and his allies. According to leaks to the Miami Herald, Trump told Maduro: “You can save yourself and your closest circle, but you must leave the country now.” The same reports said Trump offered safe passage for Maduro, his wife, and his son, “only if he agreed to resign immediately.”

Even with Trump’s clear desire to remove Maduro, the question of whether he is seeking direct control of Venezuelan oil remains uncertain. Given the challenges of extracting Venezuela’s ultra-heavy crude and the severe deterioration of the country’s energy infrastructure, reviving output would be far from easy. Francisco J. Monaldi, director of the Latin America Energy Program at Rice University’s Baker Institute, estimates Venezuelan output at just under one million barrels per day today and suggests it could rise to 4–5 million barrels per day only if $100 billion were invested over ten years.

Legal scholar and Venezuelan oil-industry expert José Ignacio Hernández noted that “Venezuela’s oil sector is destroyed… It is not an attractive short-term market, especially for a country like the United States, which already has the world’s largest oil production.” He added that Maduro has already offered U.S. firms access to oil and gold projects in Venezuela. “If Trump wanted an exclusive deal to control Venezuelan oil, he would have accepted Maduro’s offer,” Hernández said.

Oil operations in Venezuela are believed to be divided roughly as follows: PDVSA holds about 50%; Chevron around 25%; Chinese-led joint ventures 10%; Russian companies 10%; and European firms 5%. Since Trump loosened restrictions on Chevron’s operations in Venezuela, the U.S. firm has been importing roughly 150,000–160,000 barrels per day into the United States.

Experts also note that even if the regime were replaced, Venezuela is unlikely to hand over its oil assets outright to the United States. Any new government would avoid appearing to surrender the country’s key resources, which could provoke domestic blowback. However, it may allow greater participation from global oil companies in exchange for the massive investments required to rehabilitate the country’s collapsed energy infrastructure.

With the opposition leader emerging from hiding to accept the Nobel Peace Prize, and with the United States seizing an oil tanker off the Venezuelan coast, Washington’s push to unseat Maduro appears far from over.

US stock indices fell on Thursday as markets digested the Federal Reserve’s statement, alongside pressure on the technology sector following disappointing earnings from Oracle.

In a move widely anticipated as a “hawkish cut,” the Federal Reserve on Wednesday lowered the federal funds rate by a quarter percentage point, bringing it into a range between 3.5% and 3.75%.

However, the move was accompanied by cautionary signals regarding the future path of monetary policy, with three dissenting votes within the Federal Open Market Committee — something not seen since September 2019.

The committee also raised its projection for economic growth (GDP) in 2026 by half a percentage point to 2.3% compared with the September forecast. It also continues to expect inflation to remain above its 2% target through 2028.

In a press conference following the decision, Federal Reserve Chair Jerome Powell said inflation remains “somewhat elevated” due to tariff effects, expressing hope that upcoming economic data will offer a clearer picture.

He noted that the Fed has cut rates by 175 basis points since September of last year, and that policy is now close to neutral territory.

As for trading, the Dow Jones Industrial Average rose by 1% (equivalent to 484 points) to 48,541 points as of 16:06 GMT, while the broader S&P 500 dipped 0.3% (equivalent to 22 points) to 6,864 points, and the Nasdaq Composite fell 1.1% (equivalent to 240 points) to 23,411 points.

Copper prices hit fresh record highs this week, driven by two dominant forces: China’s shift toward stronger economic support and rising expectations that the US Federal Reserve will begin cutting interest rates soon. Together, these factors have pushed investors toward the metal, while simultaneously amplifying concerns about a potential supply deficit by 2026.

On the London Metal Exchange, the benchmark three-month copper contract touched $11,771 per ton, while Shanghai contracts climbed toward 93,300 yuan per ton. Futures in New York and Mumbai moved in the same direction, underscoring the global breadth of the rally.

China’s push for growth ignites copper’s surge

The latest rally began after a key meeting in Beijing, where Chinese leaders declared that supporting economic growth would be the top priority for 2026, pledging a “more proactive” fiscal stance and a “moderately accommodative” monetary policy. Investors interpreted this as a clear signal of renewed stimulus.

A significant portion of this spending is expected to flow into upgrades of power grids, renewable energy systems, data centers, and high-performance computing—sectors that consume vast amounts of copper.

Stronger Chinese trade data added to the momentum, with exports rising in November and pushing the annual trade surplus above $1 trillion for the first time. Shanghai copper finished the session up about 1.5%, setting a new closing record.

Long-term trends are reinforcing the optimism. The International Energy Agency expects refined copper consumption to reach 33 million tons by 2035 and 37 million tons by 2050, compared with around 27 million tons in 2024, suggesting that structural shortages may emerge in the years ahead.

US rate cuts add more fuel to the rally

Monetary expectations have also played a crucial role. The Federal Reserve on Wednesday cut interest rates by 25 basis points.

Rate cuts typically weaken the US dollar, making dollar-denominated commodities such as copper cheaper for global buyers. At the same time, concerns that the US might impose tariffs on refined copper have prompted American buyers to accelerate stockpiling.

Withdrawals from LME warehouses continue to rise, while US Comex inventories have reached record levels. Outside the US, however, supply tightness is worsening.

Chinese smelters plan to cut refined copper output by roughly 10% due to falling treatment charges and a shortage of concentrate supply. Analysts at GF Futures and Citic Securities warn of a potential 450,000-ton deficit by 2026. Citic also expects the market to require average prices above $12,000 per ton in 2026 to stimulate new mining investment.

Supply strains in Chile and Peru heighten market pressure

Copper supply remains under visible stress. Production disruptions in Chile and Peru—which together provide nearly 40% of global mined copper—have slowed output. Several mines are facing declining ore grades, water shortages, and delays in government approvals.

Data from the International Copper Study Group (ICSG) shows that global refined copper supply grew just 1% in 2024, while mine output rose by less than 2%, highlighting the sluggish pace of new supply.

These constraints have increased attention on future projects, including early-stage developments by Filo Corp in Argentina, Ivanhoe Electric in the US, and Hudbay’s Copper World project in Arizona. Although still years away, they form an important part of the long-term supply outlook.

Market outlook: sharp volatility ahead in 2026

Copper markets are bracing for a period of heightened volatility. Even with prices at record levels, the underlying drivers remain fragile.

LME inventories have fallen to extremely low levels compared with the past decade, while demand from key industrial sectors remains strong. This leaves the market vulnerable to abrupt price swings from even minor shifts in supply or demand.

Analysts warn that conditions in 2026 could be even tighter, as demand surges from electric vehicles, renewable energy systems, power-grid expansion, and data-center construction. A single electric vehicle can use up to four times the copper required for a gasoline-powered car.

Solar and wind installations require large amounts of copper-intensive wiring and transformers, while AI data centers and cloud-computing infrastructure are becoming a rapidly growing source of demand.

On the supply side, growth remains too slow. Many mines in Chile and Peru are facing declining ore quality, requiring more rock to be processed to produce the same amount of metal.

Environmental regulations, community-approval hurdles, and water scarcity have also delayed new projects, making supply responses to demand shocks increasingly difficult.

Financial conditions add another layer of risk, as additional US rate cuts or a weaker dollar could attract more investment into copper, while a global slowdown or weaker Chinese demand could trigger sharp price corrections.

Many analysts expect copper to be one of the most volatile commodities through 2026, given strong long-term demand and fragile short-term market conditions.

Research forecasts indicate that the refined copper market will remain in deficit for several years. J.P. Morgan projects a 330,000-ton deficit in 2026, with prices reaching around $12,500 per ton in the second quarter of 2026 and an annual average near $12,075.

The bank sees rising demand—especially from data centers, electrification, and power-grid modernization—providing major upward support, while tight supply and low inventories maintain price pressures.

Meanwhile, ICSG data shows only modest growth in mine and refined-copper supply, pointing to a structurally tight market even if prices ease slightly from current highs.

Copper enters a new phase

Copper’s surge to record highs is not a short-term phenomenon. China’s new stimulus plans, the prospect of further US rate cuts, and persistent supply problems in major producing countries are all propelling the market upward simultaneously.

With inventories low and project development slow, the market has entered a period of sustained tension.

Given copper’s importance to clean energy, electrification, and digital infrastructure, demand is likely to continue expanding in the years ahead. As a result, today’s tight conditions may persist well into 2026 and beyond.

During US trading, December copper futures rose 1.6% to $5.43 per pound as of 14:57 GMT.

Bitcoin (BTC-USD) and Ether (ETH-USD) declined on Thursday despite the Federal Reserve’s interest-rate cut, as Fed Chair Jerome Powell signaled that the central bank will proceed cautiously through 2026.

The Fed on Wednesday lowered the benchmark interest rate by 25 basis points to a range between 3.50% and 3.75%. Although widely expected, the 9–3 split within the FOMC and Powell’s hawkish tone at the press conference weighed on sentiment across digital-asset markets. One member called for a deeper 50-basis-point cut, while two members opposed any reduction at all.

Bitcoin (BTC-USD) fell more than 3% on Thursday, briefly dipping below the 90,000-dollar level before stabilizing around $90,030 at the time of writing. The decline came despite strong inflows into US spot Bitcoin ETFs over the past week.

Ether (ETH-USD) dropped 4% to below $3,200, while XRP (XRP-USD) slid more than 4% as it attempted to hold the $2.00 handle.

Derivatives markets also saw heavy losses, with liquidations totaling $440 million in the hours following Wednesday’s Fed decision, according to Coinglass. Long positions accounted for $334.8 million of the wipeout, while short positions totaled $105 million amid rising volatility.

Fabian Dori, Chief Investment Officer at Sygnum Bank, told Yahoo Finance that crypto markets remain highly sensitive to macroeconomic signals.

He said: “The 25-basis-point cut was largely priced in, but the accompanying narrative matters more for investors navigating an extremely volatile year-end. A hawkish cut isn’t surprising given the Fed’s concern over a cooling labor market and persistently elevated inflation.”

Dori noted that broader economic conditions still support long-term adoption of digital assets. “Liquidity conditions are expected to improve gradually through 2026, and business-cycle indicators continue to show fundamental momentum.”

He added that Bitcoin’s (BTC-USD) recent trading range and market sentiment suggest that much of the leverage washout has already occurred. “On-chain fundamentals, institutional allocation frameworks, and regulatory developments continue to provide medium-term tailwinds. Confidence is the key variable now.”

Fed in a “neutral zone” after three cuts

Powell’s press conference after Wednesday’s FOMC meeting struck a slightly dovish tone, while emphasizing continued caution around inflation risks and labor-market dynamics.

He said the 75-basis-point cumulative cuts since September have placed monetary policy “within the neutral zone,” adding that the central bank is “in a good position to wait and observe how the economy evolves.”

Powell described Wednesday’s rate reduction as “a difficult decision,” saying that “arguments could have been made on either side.” He noted that the gradual cooling of the labor market justified the latest cut.

He added that a substantial amount of new data will arrive before the January meeting, which will inform future policy choices.

The Fed’s projections show that policymakers anticipate only one more cut in 2026 following December’s decision.