Venezuela’s oil industry is in disrepair after years of neglect and international sanctions, so it could take years and major investments before production can increase dramatically. But some analysts are optimistic that Venezuela could double or triple its current output to return to historic levels fairly quickly.
“While many are reporting Venezuela’s oil infrastructure was unharmed by US military actions, it has been decaying for many, many years and will take time to rebuild,” said Patrick De Haan, who is the lead petroleum analyst at gasoline price tracker GasBuddy.
American oil companies will want a stable regime in the country before they are willing to invest heavily, and the political picture remains uncertain.
“But if it seems like the US is successful in running the country for the next 24 hours, I would say there would be a lot of optimism that US energy companies could come in and revitalise the Venezuelan oil industry fairly quickly,” said Phil Flynn, a senior market analyst at the Price Futures Group.
And if Venezuela can grow into an oil production powerhouse, Flynn said “that could cement lower prices for the longer term” and put more pressure on Russia.
MAJOR SHIFT NOT EXPECTED
A major shift in oil prices was not expected because Venezuela is a member of OPEC, so its production is already accounted for there. And there is currently a surplus of oil on the global market.
JPMorgan analysts led by Natasha Kaneva said in a note that with a political transition, Venezuela could raise oil production to 1.3 million to 1.4 million bpd within two years and potentially reach 2.5 million bpd over the next decade, up from about 800,000 bpd currently.
“These dynamics are currently not reflected in the back end of the oil futures curve,” the note added.
“A regime change in Venezuela would immediately represent one of the largest upside risks to the global oil supply outlook for 2026–2027 and beyond,” analysts at JP Morgan said on Monday.
Goldman Sachs analysts led by Daan Struyven said in a note on Sunday that any recovery in production would likely be gradual and require substantial investment.
The analysts estimated a US$4 per barrel downside to 2030 oil prices in a scenario where Venezuela crude production rises to 2 million bpd.
“We see ambiguous but modest risks to oil prices in the short-run from Venezuela, depending on how US sanctions policy evolves,” Struyven added.
In the short term, Venezuela’s oil production outlook this year will depend on how US sanctions policy evolves, the Goldman analysts said.
Goldman’s 2026 oil price forecasts remained unchanged, with Brent’s average at US$56 and West Texas Intermediate at US$52 a barrel while Venezuela’s 2026 oil production is forecast to stay flat at 900,000 bpd.
Additionally, Helima Croft, RBC Capital’s head of commodities research, said full sanctions relief could unlock several hundreds of thousands of barrels per day of production.
“All bets are off in a chaotic change of power scenario like what occurred in Libya or Iraq,” Croft added.
Source: CNA
