Oil markets after Venezuela: 3 scenarios ahead

“If they want to reach an agreement on combating drug trafficking, we are ready.” These were the words of Venezuelan President Nicolás Maduro at the onset of the new year, in what appeared to be an attempt to ease rising tensions between Caracas and Washington.

Maduro did not know that these remarks—made only hours earlier—would become his last official statement before a dramatic turning point in his political life.

At a secluded military base, where the echoes of guards’ footsteps reverberated through empty corridors, Maduro and his wife were temporarily in hiding. Suddenly, intense white lights cut through the darkness as a unit of U.S. special forces stormed the bedroom.

Within minutes, the president faced a radically different fate. He was swiftly transferred under heavy guard to a pre-arranged aircraft, later appearing on global media screens in custody aboard a plane bound for Washington, where he would face multiple charges before U.S. courts.

The scene evoked memories of Washington’s 1989 operation against Panama’s former leader Manuel Noriega, when US forces launched a swift and unexpected raid on his military compound.

Beyond its political shockwaves, the development marks a major inflection point for the global oil market, opening the door to multiple scenarios regarding Venezuelan crude supply and international energy prices.

Despite holding the world’s largest proven oil reserves, Venezuela’s production has suffered a prolonged and severe decline due to mismanagement, economic collapse, and persistent international sanctions.

According to The Guardian, US President Donald Trump placed notable emphasis on Venezuela’s oil during a press conference last Saturday—far more than on the “war on drugs,” which Washington cited as the official justification for its recent military action.

As geopolitical dynamics in Caracas shift and prospects emerge for external-led restructuring of Venezuela’s oil sector, global energy markets now face several possible paths affecting supply, pricing, and long-term investment.

Three broad scenarios stand out: a short-term disruption marked by volatility, a gradual stabilization and recovery phase, and a longer-term reform-driven transformation of Venezuela’s oil industry.

Pessimistic scenario: Short-term disruption, market volatility

Historically, major geopolitical crises trigger higher risk premiums and price volatility in oil markets—a pattern likely to define the initial phase following the Venezuelan shock.

Reuters data show that Venezuela’s oil production declined to around 1.1 million barrels per day by late 2025, despite the country holding the world’s largest proven oil reserves at approximately 303 billion barrels.

Multiple reports also indicate that exports fell by about 500,000 barrels per day in December 2025, due to U.S. sanctions and a maritime blockade.

Although Venezuela’s current output accounts for less than 1% of global oil production, the nature of its crude—largely classified as heavy, high-sulfur oil—gives it strategic importance.

This importance is particularly evident for certain refineries, notably U.S. Gulf Coast refineries, which are specifically designed to process this grade of crude.

Expected Scenarios after the Venezuela Crisis

Energy analysts note that a complete halt in Venezuelan exports could drive heavy crude prices higher relative to Brent, as buyers seek alternatives from Canada and Mexico, potentially creating price pressure specifically within the heavy crude market.

This pattern suggests that psychological factors and escalation expectations may play a larger role in short-term price movements than actual changes in supply.

Accordingly, any shortage of Venezuelan heavy crude could place additional pressure on diesel and jet fuel markets, given the high yield of these products derived from this type of crude.

With Russian exports already declining, a prolonged disruption could further lift refining margins and end-product prices.

By way of example, US sanctions and tighter maritime restrictions on Venezuelan oil tankers in late 2025 led to a modest uptick in oil prices, underscoring the market’s sensitivity even to partial supply disruptions.

Moderate Scenario: Stabilization and Gradual Recovery

Following the initial shock phase, markets could shift toward a more balanced scenario, driven by the containment of disruptions through international policy coordination and market adaptation.

Political signals from Washington have pointed to a potential redirection of Venezuelan oil exports toward the US market, particularly to Gulf Coast refineries, which have historically relied on Venezuelan heavy crude.

Such an addition could amount to around 200,000 barrels per day (bpd), should political and legal conditions be adequately aligned.

This approach reflects an effort to achieve relative supply stability and reduce reliance on more geographically distant sources.

The decision by OPEC+ to maintain production levels unchanged in early 2026 could further support this scenario, signaling the alliance’s preference for preserving market balance.

This policy plays a key role in containing sharp price spikes, even amid heightened geopolitical tensions.

Another potential stabilizing factor lies in a partial easing of US sanctions, which could allow for limited capital inflows into Venezuela’s oil sector.

According to energy consultancy reports, restoring a substantial portion of Venezuelan oil production—estimated at around 2.5 million bpd—would require $15–20 billion in investment over a decade.

During periods of partial sanctions relief between 2022 and 2024, Venezuela’s oil exports rebounded to nearly 900,000 bpd before declining again as restrictions were tightened.

An increase in Venezuelan oil production would add to global supply and help alleviate pressure on international oil prices, particularly if it coincides with stable output levels among major OPEC+ producers. This would enhance the market’s ability to meet rising demand and reduce crude price volatility.

Rebuilding Venezuela’s Oil Sector

This scenario is the most far-reaching and impactful, yet also the most complex and difficult to implement.

Energy experts estimate that restoring Venezuela’s oil production to its historical peak—around 3.5 million bpd in the 1970s—would require investments of up to $58 billion over a decade.

Other estimates, cited by The Guardian, place the required investment at USD100 billion or more, reflecting the severe deterioration of oil infrastructure following years of neglect and underinvestment.

If successfully implemented, a full-scale recovery could enable Venezuela to diversify global heavy crude supply, easing pressure on traditional producers such as Canada and Mexico and reshaping global crude trade flows.

According to Bloomberg, the injection of large volumes of Venezuelan heavy crude into global markets would increase supply to U.S. Gulf Coast refineries as well as European and Asian consumers, potentially easing diesel and jet fuel prices and reducing price tensions.

However, this scenario remains contingent on restoring investor confidence, ensuring political stability, and reforming the legal frameworks governing investment contracts.

Over the long term, the return of significant Venezuelan oil volumes could exert downward pressure on global oil prices.

A historical parallel can be drawn with Iraq, whose oil production stood at around 2.1 million bpd prior to the US-led invasion, before declining sharply amid political and security disruptions. Production later recovered gradually through field development contracts and agreements with international oil companies.

According to data from global oil statistics organizations, Iraq’s oil output rose steadily between 2022 and 2025, averaging more than 4 million barrels per day during that period.

Ultimately, Venezuela’s crisis serves as a stark reminder that oil markets are shaped not only by production figures, but by political and geopolitical dynamics.

It also underscores how developments in a major producing country can redraw the global energy map, influencing prices, investment flows, and supply chains for decades to come.

Sources: Argaam, CNN, Reuters, Bloomberg, Investing.com, AP, The Guardian, iInvest Platform