Why venezuela’s political transition has left oil markets largely unmoved

[Ben Graham]

• Venezuela’s production capacity remains capped near 1 million barrels per day, far below historical levels.
• Sanctions, degraded infrastructure, and political risk prevent a rapid supply rebound.
• Heavy, high-sulfur crude requires high prices and massive investment to be economically viable.
• Venezuela’s oil is a long-term strategic option, not a near-term supply shock.

Global oil prices have reacted only marginally to Venezuela’s political transition, reflecting a market consensus that the country will not deliver a meaningful increase in crude supply in the near future. While Venezuela holds vast oil reserves, investors remain focused on practical constraints—limited production capacity, deteriorated infrastructure, and weak investment economics—which prevent any rapid supply response.

Production capacity remains severely limited

At present, Venezuela’s effective production capacity is estimated at around 1 million barrels per day, only slightly above current output and far below the roughly 2.5 million barrels per day produced a decade ago. Years of mismanagement, underinvestment, and international sanctions have left the oil sector unable to scale up quickly. Recent U.S. actions have reinforced these limits: sanctions on shipping reduced exports to about 500,000 barrels per day, forcing production cuts as storage filled up. Even proposals for the U.S. to purchase oil held in floating storage would ease logistical pressures rather than unlock new supply.

Weak investment economics and high costs

Some modest recovery is possible if sanctions are eased and the United States becomes a stable buyer. Smaller, risk-tolerant producers could restart marginal fields, potentially lifting output by around 300,000 barrels per day over the next two to three years. This would bring production toward roughly 1.4 million barrels per day—still insufficient to influence a global market consuming more than 100 million barrels per day.

Structural and economic barriers remain substantial. Venezuela’s heavy, high-sulfur crude requires costly extraction, blending, and specialized refining, resulting in persistent discounts to benchmarks such as WTI. Estimates suggest break-even prices could approach USD 80 per barrel, making large-scale investment unattractive at current price levels. Rebuilding the sector would require around USD 100 billion in total investment, with annual spending of roughly USD 12 billion needed for decades to return production toward 3 million barrels per day—likely not before around 2040.

Long-term strategic value, limited near-term impact

Political risk further discourages major oil companies. A history of nationalization, contract revisions, and unresolved arbitration claims has left international producers wary of committing capital without strong legal and fiscal guarantees. While Chevron has maintained a limited presence, most large Western firms remain cautious.

Against this backdrop, U.S. interest in Venezuela’s oil appears driven less by immediate market needs and more by long-term strategy. With U.S. shale output expected to plateau later this decade and other Western Hemisphere producers peaking in the early 2030s, future supply constraints are becoming a growing concern. Global oil demand continues to rise, and maintaining current production levels will require massive ongoing investment worldwide.

In this context, Venezuela represents a long-duration strategic option rather than a near-term supply shock. Its oil resources could matter in the 2030s if prices rise significantly and political conditions stabilize, but for now, structural limitations explain why markets have largely shrugged off recent developments.

Technical perspective

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Daily chart of the CFD contract based on Brent crude oil prices, source: TradingView

At present, Brent crude prices are rising dynamically and approaching the area of USD 63.5 per barrel. For now, the USD 59 level has proven to be a fairly strong support zone, with lows in this area recorded in mid-December 2025 as well as earlier in April and May. This support has so far prevented a deeper decline, and with a relatively high probability, prices may continue to move higher in the short term. Technical resistance is located around USD 65–65.5 per barrel, with the next major resistance near USD 70.

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