Martha Dowding
Research Associate, Flux
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Vote of no confidence for geopolitical impact…?
Despite an uncertain geopolitical climate continuing to cloud the market, it may not yet buy into a sustained escalation narrative
Published: January 12, 2026
Written by:
Martha Dowding
View: $60.50-62.50 (Bearish)
The M1 Brent futures contract surged at the end of last week, closing the week at $63/bbl and opening at $63.55/bbl on 12 Jan. Despite an uncertain geopolitical climate continuing to cloud the market, our base case expects that the market is not yet buying into a sustained escalation narrative between the US and Iran. We thus expect prices to soften by the end of this week, as technicals lean bearish and positioning remains net short.
Key drivers to monitor this week include:
- The market digesting supply-side developments in Venezuela
- Geopolitical turmoil in Iran
- Positioning and Technicals in Brent
Venezuelan developments are digested
The capture of Nicolás Maduro earlier this month has sparked speculation around Venezuela’s supply potential, with poor oil infrastructure and resource abandonment providing a “well, actually” to impressive theoretical output numbers. This has been a common response from market participants, with little market impact. Still, Venezuelan oil held in tankers at sea has surged to over 29mb from about 20mb w/w, adding to the oversupply narrative, per Bloomberg, citing Kpler data.
President Trump believes that restarting Venezuela's oil infrastructure will drive oil prices to his target of $50/bbl, and Trafigura expects its first vessel to load within the next week. ExxonMobil’s CEO, however, called the country 'uninvestable' without significant changes, which seems to be the prevailing market sentiment currently, with the state of the equipment clear from satellite imagery.
Geopolitical turmoil in Iran
Turmoil in Iran intensified over the weekend, and there seems to be growing potential for escalation from the international community. US President Donald Trump has hinted at readiness to strike, saying, "We're looking at some very strong options. We’ll make a determination." Khameini has been blaming the US, saying the disorder is to “please the President of the US and make him happy.” A significant amount of oil exports is at risk if a strike occurs in the oil sector, as has been called for, according to ANZ reports.
Monday’s gap up in prices indicates a rising risk premium, which may continue to rise should we see further escalation. However, these early gains have since been sold into, signalling a vote of no confidence in a meaningful escalation in Iran.
Positioning and Technicals in Brent
Flux’s CTA net positioning model shows net positioning for Brent remains negative despite rising to -16.9k lots on 12 Jan, compared with -34.3k lots on 08 Jan. Moving on to momentum indicators, stochastics signal a bearish crossover in overbought conditions, suggesting a short-term pullback. The daily candle on 12 Jan has been a bearish Marabozu, which suggests there is fairly ubiquitous selling at higher levels.
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