In a stunning turn of events, the US attacked Venezuela over the weekend, captured its leader, Nicolas Maduro, and imposed a naval blockade. The chaos in the Latin American nation, once an oil-producing powerhouse, is being keenly eyed, as this event adds a “geopolitical risk premium” on energy markets.
In the initial reaction, Brent crude oil fell as much as 1.2% to $60 a barrel.
While the immediate effect is seen as limited, the change in control over Venezuela’s vast oil reserves poses critical implications for heavy crude pricing and long-term supply forecasts.
Why is oil price falling amid US-Venezuela conflict?
Venezuela has the largest proven oil reserves with an estimated 303.8 billion barrels (as of 2020), trailed by 297.5 billion barrels from Saudi Arabia, showed data from Prabhudas Lilladher (PL) Capital. The next three largest reserves are way behind at 168.1 billion barrels, 157.8 billion barrels and 145 billion barrels with Canada, Iran and Iraq, respectively.
However, after more than a decade of sanctions, underinvestment, and infrastructure decline, Venezuelan production has fallen to just 1% of global supply, and the country isn’t among the top 20 global producers.
“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,” explained Kaynat Chainwala, AVP Commodity Research, Kotak Securities.
Prices are unlikely to rise significantly unless the situation escalates into broader instability or disruption of critical energy infrastructure, said Naveent Damani, Head of Research — Commodities, Motilal Oswal Financial Services. “The crisis does add a geopolitical risk premium, increasing short-term volatility, but with global inventories comfortable and supply uninterrupted, the impact remains modest.”
What could move oil prices?
Commenting on what can influence the energy markets, Ross Maxwell, Global Strategy Operations Lead, VT Markets, said that markets are less focused on Venezuela’s current production levels and more on how the political control will play out.
“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, if an interim government gains credibility and moves toward US-backed reforms, the medium and long-term result is likely to be additional Venezuelan barrels returning to the market, which would be bearish for prices, he cautioned.
Damani added that for crude, OPEC remains a more decisive factor. The OPEC countries on Sunday decided to keep the supply unchanged. “Oil prices are likely to remain range-bound and prone to headline volatility in the near term. The more decisive factor continues to be OPEC+ supply management. 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,” the MOSL analyst opined.
Crude oil prices: Key targets
In 2025, while gold glittered, ‘black gold’ was battered. Brent and WTI benchmarks each lost nearly 20%, recording their steepest fall since 2020, as per a Reuters report. It was also the third straight year of losses for Brent — the longest streak on record.
In the near term, a broad range between 5,000 level ($55 for WTI) or 5,500 ($65 for the WTI) could be seen, said Damani, adding that the weakness towards 4,600 or $47 can also be a short-term possibility, with the major trend change happening only above 5,500 or $63 levels.
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