Venezuelan Developments Leave Room For Long-Term Supply Increases

(MENAFN- ING) 2026 oil outlook remains intact for now despite Maduro arrest

While the Trump administration has been taking a more hawkish stance against Venezuela in recent months, developments over the weekend have led to shockwaves around the globe, with the US arresting Venezuelan President Nicolas Maduro and flying him to the US to face criminal charges related to drug trafficking. We won't speculate on the exact reasons behind the decision by the US administration to remove Maduro, but clearly, it has potentially significant implications for the oil market.

It leaves only further supply uncertainty for the oil market, something the market has faced plenty of over the last year.

The short-term implication for the market really depends on what kind of transition in power we see in Venezuela. Clearly, a prolonged and messy transition increases the risk for supply disruptions in the short term. However, for now, Vice President Delcy Rodríguez has taken over. While her rhetoric was initially defiant, it appears to be shifting already, with statements that Venezuela and the US should work together. A smooth transition, with a government which is also more willing to cooperate with the US, likely leaves more downside for the market.

It increases the likelihood that the US will lift its blockade on sanctioned oil tankers entering and leaving Venezuela, offering the potential for downside in prices in the short term, while also potentially leaving room for an easing in sanctions down the road.

However, a messier transition puts around 900k b/d of supply at risk; the bulk of this oil goes to China, while US refiners import a little less than 150k b/d. While losing this supply would provide some upside to our current forecasts, a well-supplied market means the upside is likely limited. In addition, some supply losses would have already been priced in, given that we saw Venezuelan oil exports coming under pressure in December with the US blockade of sanctioned oil tankers in and out of Venezuela.

For now, developments over the weekend have not led us to change our view on the oil market for 2026. We still expect a well-supplied market to weigh on prices and continue to forecast Brent to average $57/bbl over 2026. Meanwhile, for 2027, there are downside risks to our $62/bbl forecast if we start to see meaningful supply increases from Venezuela, although much will also depend on how OPEC+ responds.

Potential supply increases are significant, but still a long way off

While Venezuela sits on significant oil reserves, its production is fairly small, with output averaging a little over 900k b/d in 2025. This is less than 1% of global consumption. Domestic oil supply has fallen significantly over the last 20 years following the expropriation of domestic assets from foreign oil companies, mismanagement of resources, and sanctions which have plagued the Venezuelan economy. In the early 2000s, Venezuelan oil production was close to 3m b/d. By 2015, it fell below 2.4m b/d, and declines have only picked up since then.

There is potential for a large recovery in Venezuelan oil production; however, this will not be a quick process. Any significant increase would likely take several years.

We will need to see significant investment in Venezuela's oil infrastructure, following years of neglect. And in order for this investment to materialise, we will need to see foreign oil companies agree to invest in the domestic industry. This is easier said than done, given that both ExxonMobil and ConocoPhillips had their assets in Venezuela expropriated back in 2007. In fact, both companies were awarded damages by international courts, which Venezuela has failed to pay. And so there may be reluctance amongst foreign companies to invest in the domestic oil industry, given Venezuela's track record. We would likely need to see a more appealing and stable environment before the necessary investment emerges.

Chevron is the only US oil company operating in Venezuela, having received a special licence from the US government to continue to operate despite sanctions.

A recovery in Venezuelan supply would increase heavy crude availability

Venezuela produces a heavy crude oil, which is an important feedstock for refiners on the US Gulf Coast. In the early 2000s, the US was importing close to 1.3m b/d of crude oil from Venezuela. By 2018, this fell to a little over 500k b/d, and over the first 10 months of 2025, imports averaged less than 150k b/d. Therefore, any supply increases from Venezuela will be welcomed by refiners looking for heavier grades of crude oil.

This also leaves some risks for other key suppliers of heavier grades of crude oil to US refiners. Canada stands out as a large supplier of heavy crude oil to the US. Clearly, we could see West Canada Select differentials coming under pressure in the longer term if we see meaningful supply increases from Venezuela in the years ahead.

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