The U.S. naval blockade adds to the difficulties faced by Venezuela in exporting oil. By enforcing restrictions on tankers, the U.S. makes it harder for Venezuela to sell its oil. However, Chevron’s ships are not affected by these sanctions, allowing the company to keep shipping oil despite the blockade.

Challenges in Venezuela

Venezuela’s oil production also struggles due to a shortage of Russian naphtha. This lack of supply disrupts PDVSA’s oil processing. Since Chevron is still active in Venezuela, its approach might inspire other companies that want to work in the country’s resource-rich sector, even with the existing geopolitical and resource challenges. Looking back, Chevron’s special role in Venezuela is important, but the situation has changed. Venezuela’s oil production has shown modest recovery, now at about 950,000 barrels per day according to the latest OPEC report—a fragile improvement from previous lows. Recently, the U.S. Treasury extended Chevron’s operating license for another six months but made future renewals dependent on political events, creating new uncertainty in the market.

Market Implications

This link to political outcomes suggests we should expect increased volatility in Chevron’s options, especially for contracts that expire around the next license renewal in the summer. The market is anticipating potential disruptions, making strategies like selling covered calls or cash-secured puts on CVX appealing for collecting premium. This trend is shown in the CBOE Crude Oil Volatility Index (.OVX), which has risen over 3% in the past week. For those taking a directional approach, this situation offers a clear choice. A bullish trader might use call debit spreads on CVX to bet on stable operations and positive production surprises. On the other hand, the significant geopolitical risks warrant buying protective puts or setting up put spreads to safeguard against unexpected negative news from Washington. This context adds an ongoing risk premium to the broader oil market, even though Venezuelan oil represents only a small part of global supply. With WTI futures now around $85, any indication of instability—like recent satellite images from Planet Labs showing more naval patrols—could lead to a sharp price increase. Therefore, we should consider long-dated call options on oil ETFs to take advantage of this potential upward movement. Create your live VT Markets account and start trading now.

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