Oil Markets After Venezuela: Potential Turbulence.. Supply Glut Cushions Shock

Global oil markets are closely watching developments surrounding Venezuela as political tensions escalate following the arrest of the country’s president by the United States, raising concerns over possible disruptions to crude supply.

Energy analysts broadly expect a short-term uptick in oil prices, but they also argue that the market remains well positioned to absorb any shock, supported by ample supply and seasonally weak demand, particularly during the first quarter of the year.

Arne Lohmann Rasmussen, Chief Analyst and Head of Research at Global Risk Management, said the oil market remains highly sensitive to geopolitical developments. However, he expects only a modest reaction.

“Brent crude prices may rise slightly at market open, by one or two dollars, or even less,” Rasmussen noted. “As with other geopolitical events in 2025, the market will quickly conclude that there is an oversupply of oil, especially in the first quarter, and that any temporary loss of Venezuelan barrels is already largely priced in.”

He added that concerns over Venezuelan supply could provide limited support to the heavy fuel oil market, which relies on residual oil abundantly found in Venezuelan crude. Still, Rasmussen expects prices to ease again during the trading day.

“If political developments ultimately lead to a real regime change, that could increase oil supply over time,” he said. “But a full production recovery would take considerable time.”

Venezuela holds the world’s largest proven oil reserves, more than 300 billion barrels, or roughly 17% of global reserves, most of them concentrated in the Orinoco Belt and dominated by heavy crude.

“Reserves are one thing, production is another,” Rasmussen said. While output has risen over the past five years from below 500,000 barrels per day in 2020, it remains far below levels seen two decades ago, when production reached around 2.5 million barrels per day. Years of mismanagement, sanctions, and underinvestment have taken a heavy toll.

In a worst-case scenario, Rasmussen estimates that up to 500,000 barrels per day of Venezuelan exports could disappear from the market. “Even that scale of disruption is manageable under current conditions,” he said, pointing to forecasts of a significant supply surplus in the first quarter due to weak seasonal demand and rising OPEC+ output.

Venezuela produces very heavy, sulfur-rich crude, which only certain refineries, mainly in the United States, can process efficiently. Some Chinese refineries have also taken sanctioned Venezuelan oil in recent years. Analysts say any shortage of this grade would not pose a major problem for the broader market.

According to S&P Global Commodities data, Venezuela exported 19 million barrels of oil in December, down from 27.2 million barrels in November and 20.7 million barrels in December 2024.

David Gorbanz, oil market analyst at ICIS, warned that a major disruption to seaborne Venezuelan flows, estimated at around 600,000 barrels per day, could briefly push oil prices higher and widen heavy sour crude differentials, adding a short-lived risk premium to Brent and WTI benchmarks.

However, Gorbanz emphasized that the oil market appears well supplied through 2026. “Unless disruptions are both large and prolonged, benchmarks typically retreat once the market finds alternatives,” he said, citing heavy crude from Canada, the Middle East, and Latin America.

He added that Washington’s leverage lies less in owning oil barrels and more in controlling access, through shipping, insurance, financing, and enforcement risks. Recent actions against sanctioned tankers, he said, underscore the United States’ ability to indirectly influence oil flows, particularly toward Asia.

Gorbanz expects alternative heavy crude suppliers to be the primary beneficiaries of tighter Venezuelan supply, as price differentials improve. These include Canadian heavy oil producers and Middle Eastern exporters of sour crude.

Chevron, meanwhile, stands to gain only if it retains sustainable operating and export capacity under U.S. licenses. “Recent developments highlight a tougher U.S. stance,” Gorbanz said, making Chevron’s position dependent on political decisions rather than automatic market gains.

For now, the message from analysts is clear: while Venezuela remains a geopolitical flashpoint, the global oil market’s current surplus leaves it well equipped to weather potential disruptions.