Political turmoil in Caracas dominated headlines at the start of 2026. After the dramatic events of early January and the rewriting of Venezuela’s hydrocarbons law on January 29, analysts quickly began debating the ethical dimensions of renewed US engagement in the Orinoco Belt.

But while the world focuses on politics, the real story is unfolding thousands of miles away, inside the distillation towers stretched along the US Gulf Coast.

To understand why Chevron is moving aggressively to expand Venezuelan production, one must look beyond diplomacy and into refining chemistry.

Imbalance in the US crude mix

The United States is now the world’s largest oil producer. That may sound like energy independence, but the reality is more complex.

Most oil produced from shale formations — such as the Permian Basin — is light and sweet, meaning it is easy to refine and low in sulfur.

However, many US refineries were not designed to process this type of crude. During the 1980s and 1990s, refiners invested billions of dollars to increase oil refinery complexity. They installed coking units, hydrocrackers, and desulfurization systems — facilities specifically built to process heavy, high-sulfur crude from countries such as Venezuela and Mexico.

These systems were designed to buy difficult, discounted barrels and convert them into high-value products such as gasoline, diesel, jet fuel, and petrochemical feedstocks.

Running light crude through these systems is technically possible but economically inefficient. It is like using equipment built for processing scrap metal and feeding it premium-grade material — it works, but margins fall.

For a complex refinery such as Chevron’s Pascagoula facility, heavy crude is not just useful — it is optimal.

Disappearance of heavy barrels

For years, the US Gulf Coast relied on imports to supply this heavy crude slate. That supply picture has changed sharply.

Mexican exports have declined as domestic output fell and local refining capacity expanded. Russian medium and heavy barrels largely disappeared from the US market after sanctions. Canadian heavy crude remains important, but transport constraints prevent it from being a perfect substitute.

The result is a structural refining gap: Gulf Coast refineries need heavy crude to maximize margins, but global availability has become more limited.

This is where Venezuela returns to the picture.

Venezuelan grades such as Merey 16 are dense, high-sulfur, and technically challenging — but exactly what complex refineries are built to run. In the right system, these barrels can generate strong refining margins because they are usually priced at a discount to lighter crudes.

Chevron’s strategic advantage

Chevron’s positioning was not accidental. While many Western companies exited Venezuela during the nationalization and sanctions years, Chevron maintained a presence through special US Treasury licenses, allowing it to preserve infrastructure, relationships, and operational continuity.

Now, with legal reforms and shifting geopolitical conditions, the company holds a first-mover advantage. Analysts expect significant production increases supported by solid project economics. That has been reflected in the company’s share price, which has risen more than 20% since the start of the year.

Chevron can produce heavy oil in Venezuela at relatively low cost, then refine it in its high-complexity US facilities. That allows it to capture value across multiple stages: production, logistics, and end refining margins.

In practice, this is vertical integration working as designed. Instead of selling crude into a volatile market, the company can internalize the economics of the barrel and its derived products, helping balance oil price cycles — higher crude prices support upstream, while lower crude prices support refining.

Molecules drive markets

Public debate around Venezuelan oil is often framed in ethical or political terms. Those considerations matter, but markets ultimately respond to physical realities.

Refineries do not respond to ideology — they respond to API gravity, sulfur content, and product yield curves.

As long as the United States operates some of the most complex refining systems in the world, demand for heavy crude will remain.

Chevron appears to understand that today’s real competitive edge is not just producing more oil, but controlling the right type of molecules. In a market where heavy crude supply is tightening, those molecules translate directly into higher refining margins, stronger cash flow, and a durable competitive advantage.

Major US stock indexes moved within narrow ranges in choppy trading on Tuesday following a long weekend, as heavyweight technology stocks weakened after an AI-led selloff, while the financial sector outperformed the broader market.

The S&P 500 information technology sector trimmed its losses and traded slightly higher, with gains in Nvidia and Apple limiting the impact of a decline in Microsoft shares.

AI pressure and fears over Chinese models

Concerns that artificial intelligence could disrupt existing business models triggered a selloff last week in software companies, brokerages, and trucking firms, pushing the three main Wall Street indexes to their largest weekly losses since mid-November.

Uncertainty increased with rising perceived risks from Chinese AI firms, after Alibaba on Monday unveiled a new AI model, Qwen 3.5, designed to carry out complex tasks independently.

Pressure on software stocks continued, with the broader S&P 500 software index falling 1.4%. CrowdStrike dropped 5%, Adobe lost about 2%, and Salesforce declined between 2% and 5%.

Art Hogan, chief market strategist at B Riley Wealth, said: “It’s an indiscriminate selloff across everything related to technology, with heavier focus on software and the risk of disruption for some application companies. When that kind of momentum builds, it becomes difficult to find stocks that can stand out for a while.”

Main index performance

The Dow Jones Industrial Average rose 33.25 points, or 0.07%, to 49,534.18.

The S&P 500 gained 0.63 points, or 0.01%, to 6,836.80.

The Nasdaq Composite fell 21.58 points, or 0.10%, to 22,525.09.

Banks lead gains

The financial sector stood out as a bright spot, with its S&P 500 sector index rising 1.2%, supported by gains of about 1.5% each in major banks including Goldman Sachs and JPMorgan Chase, which also helped lift the Dow Jones index.

By contrast, materials and energy shares declined, tracking weaker commodity prices.

Focus on the Fed’s preferred inflation data

Market attention this week is centered on the personal consumption expenditures report, the Federal Reserve’s preferred inflation gauge, for signals on the inflation path and its potential impact on the pace of rate cuts.

This comes after softer-than-expected consumer inflation data last week, which slightly strengthened bets on rate cuts this year.

Markets are currently pricing a 52% probability of a 25 basis point rate cut in June, up from about 49% a week earlier, according to CME’s FedWatch tool.

Several Federal Reserve officials, including Michael Barr and Mary Daly, are also scheduled to speak during the day.

Geopolitical developments and market breadth

On the geopolitical front, Iran and the United States reached an understanding during a second round of nuclear talks in Geneva, while stressing that more work is needed.

In market breadth indicators, declining stocks outnumbered advancers by 1.25 to 1 on the New York Stock Exchange, and by 1.28 to 1 on the Nasdaq.

The S&P 500 recorded 37 new 52-week highs versus 9 new lows, while the Nasdaq posted 62 new highs and 170 new lows.

Nickel prices edged lower during Tuesday’s trading after posting strong gains last week, supported by news that the world’s largest nickel mine in Indonesia received a much smaller production quota for this year, which boosted supply concerns.

The three-month benchmark nickel contract on the London Metal Exchange touched $17,980 on Wednesday, its highest level since January 30.

French mining company Eramet said its PT Weda Bay Nickel project — a joint venture with China’s Tsingshan and Indonesia’s PT Antam — received an initial production quota of 12 million wet metric tons for 2026, down from 32 million wet metric tons in 2025, adding that it will apply for an upward revision of the quota.

After a prolonged period of low prices, nickel has jumped about 18.6% over the past three months and reached its highest level in more than three years on January 25, after Indonesia — the world’s largest nickel ore producer — pledged to curb supply.

Nitish Shah, commodities strategist at WisdomTree, said Indonesia clearly recognizes its pricing power, noting that its control of about 60% of global output makes it more influential than OPEC in the oil market. He added that Jakarta has realized it does not need to overproduce to generate strong revenues.

Despite that, the International Nickel Study Group expects a market surplus of 261,000 tons this year. LME futures positioning data also showed that one participant holds a short position in the February contract equal to between 20% and 29% of total open interest.

Nickel came under pressure on Tuesday as the dollar index rose 0.5% to 97.4 points, making dollar-denominated commodities less attractive to holders of other currencies.

In trading, spot nickel contracts were down 0.2% at $16.7K per ton as of 16:26 GMT.

Brent crude oil prices held largely steady during Tuesday’s trading, as investors await the outcome of anticipated nuclear talks between Iran and the United States, alongside trilateral peace negotiations involving the United States, Ukraine, and Russia, all taking place in Geneva.

Brent crude futures rose by 11 cents, or 0.16%, to $68.76 per barrel by 11:57 GMT, after posting gains of 1.33% in Monday’s session.

US West Texas Intermediate crude reached $63.86 per barrel, up 97 cents or 1.54%. However, this move reflects the full price action from Monday, as the contract did not settle that day due to the US Presidents’ Day holiday.

Asian markets saw limited trading activity, with many exchanges closed on Tuesday for Lunar New Year holidays, including China, Hong Kong, Taiwan, South Korea, and Singapore.

Investors are closely monitoring relations between Washington and Tehran, as any escalation or potential conflict could push Iran to close the Strait of Hormuz — a vital route for global oil exports — which would have a major impact on international energy supplies.

Attention is also focused on Russia–Ukraine peace talks, since any settlement could lead to sanctions relief and the return of Russian oil to major global markets.

Prices tied to diplomatic signals

Sugandha Sachdeva, founder of SS WealthStreet research in New Delhi, said market sentiment is closely linked to the tone and progress of these negotiations, keeping a geopolitical risk premium embedded in prices.

She added that oil prices are likely to remain volatile, with sharp upward and downward moves driven more by diplomatic signals than by supply and demand fundamentals.

Washington and Tehran began indirect talks in Geneva on Tuesday focused on their long-running nuclear dispute, amid a US military buildup in the Middle East. Iran’s supreme leader warned that any US attempt to overthrow his government would fail.

Semi-official Fars News Agency reported that Iran would close parts of the Strait of Hormuz for several hours on Tuesday as a “security precaution” to ensure safe navigation, alongside military exercises conducted by the Revolutionary Guard in the waterway.

Also in Geneva, Ukrainian and Russian officials are scheduled to meet for a new round of US-mediated peace talks, with the Kremlin indicating that discussions will likely focus on territory, the core point of disagreement.

On the ground, Ukrainian attacks on Russian energy infrastructure continue. The Ukrainian military said on Tuesday it targeted the Ilsky refinery, and a drone strike was reported on the port of Taman.

Separately, Russia’s Interfax agency reported that oil production at Kazakhstan’s giant Tengiz field is gradually increasing following an outage that occurred last January.