In a dramatic geopolitical escalation over the weekend, United States forces launched an attack on Venezuela, captured the nation's leader Nicolas Maduro, and enforced a naval blockade. The turmoil in the Latin American country, a former oil titan, is now under intense global scrutiny as it injects a fresh layer of uncertainty into world energy markets.
Oil Market's Muted Initial Reaction
In the immediate aftermath, global benchmark Brent crude oil fell by as much as 1.2% to $60 per barrel. This counterintuitive drop highlights the complex dynamics at play. Analysts point out that while the event adds a "geopolitical risk premium," the immediate effect on global oil supplies is seen as limited.
Kaynat Chainwala, AVP Commodity Research at Kotak Securities, explained this reaction: "Oil prices showed little reaction to the geopolitical shock surrounding the capture of Venezuelan President Nicolás Maduro as markets judged the impact on global crude supplies to be limited. OPEC+ holding output policy steady, the absence of damage to Venezuelan oil infrastructure, and the country’s small share of global output helped cap any risk premium."
Venezuela's Vast Reserves vs. Crippled Production
The significance of Venezuela in the oil world is defined by a stark paradox. The nation sits atop the world's largest proven oil reserves, estimated at 303.8 billion barrels (as of 2020), according to data from Prabhudas Lilladher (PL) Capital. This puts it ahead of Saudi Arabia's 297.5 billion barrels. Canada, Iran, and Iraq follow distantly.
However, after years of severe sanctions, chronic underinvestment, and crumbling infrastructure, Venezuela's actual production has collapsed. It now contributes a mere 1% of global supply and is not ranked among the top 20 oil-producing nations. This disconnect between potential and current output is central to the market's analysis.
Future Scenarios: What Could Move Oil Prices Next?
Experts believe the real market mover will be the political outcome and its effect on Venezuela's ability to restore production. Ross Maxwell, Global Strategy Operations Lead at VT Markets, noted that markets are focused on how political control will evolve. "If US actions lead to an interim or opposition-led administration, oil prices will respond to how quickly that authority can assert control, negotiate export arrangements, and secure international recognition. In the short-term, this risk could be bullish for crude," he opined.
However, Maxwell cautioned that a credible, US-backed government could eventually oversee a return of significant Venezuelan oil to the international market, which would be bearish for prices in the medium to long term.
Naveen Damani, Head of Research — Commodities at Motilal Oswal Financial Services, emphasized that OPEC+ supply management remains a more decisive factor than the Venezuela crisis for crude prices. "If the group maintains output discipline, prices can remain supported despite geopolitical noise. Conversely, any easing of production cuts combined with strong non-OPEC supply could push the market lower," he stated.
Damani added that prices are unlikely to surge significantly unless the situation escalates into broader regional instability or disrupts critical energy infrastructure elsewhere.
Crude Price Outlook and Key Levels
The oil market enters this crisis after a weak 2025, where Brent and WTI benchmarks each lost nearly 20%, their steepest fall since 2020. For Brent, it was the third consecutive year of losses.
Looking ahead, Damani sees a broad near-term range, with weakness towards $47 for WTI being a short-term possibility. A major trend change, he suggests, would only occur if prices sustain above the $63 level.
Disclaimer: This analysis is for educational purposes. The views expressed are those of individual analysts. Investors are advised to consult certified experts before making any investment decisions, as market conditions are volatile.
