Veteran Investor Dismisses Venezuela, Warns Of Long-Term Oil Underinvestment

The arrest of the Venezuelan President Nicolas Maduro brought the seemingly forgotten oil sector into the spotlight. Yet, West Texas Oil (WTI) failed to reverse meaningfully, erasing Monday’s 2% gain and closing at $57 per barrel on Tuesday.

“It is premature to evaluate the impact of Nicolas Maduro’s capture on the oil balance,” PVM Oil analyst Tamas Varga said, according to Reuters. “What seems obvious, nonetheless, is that oil supply will be sufficient in 2026, with or without an increase in production from the OPEC member,” he added.

Meanwhile, Reuters’ December poll showed participants anticipating oil prices to remain under pressure in 2026 due to rising supply and relatively weak demand growth. The survey suggested that even with geopolitical flare-ups, spare capacity and incremental output from non-OPEC producers would cap sustained upside next year.

Still, Venezuela’s situation has reintroduced uncertainty. The arrest has raised speculations about easing sanctions, potentially allowing Venezuelan crude to return to global markets. Yet, the country’s role in oil production has diminished sharply.

An output of roughly 1 million barrels a day is a fraction of historical levels, and restarting large volumes would be neither quick nor cheap after prolonged neglect of fields, pipelines, and other infrastructure. 

The Underinvestment Trifecta

From a longer-term perspective, veteran investor Rick Rule argues that the focus on near-term surpluses misses a deeper structural issue. In Tuesday’s interview with CapitalCosm, Rule noted persistent underinvestment across the industry, particularly in politically constrained producers such as Venezuela, Mexico, and Russia.

“This underinvestment has consequences for production in the out-years, and I would suspect that underinvestment really comes home to bite in 2028,” he said, putting the median price projection at that time at $85 but not being surprised to see it “much, much, much higher.”

In that scenario, he sees significant potential in the oil field services sector, which has been starved of capital for years. Once demand for drilling, completions, and maintenance accelerates, service companies could experience a sharp rebound as producers scramble to arrest decline rates.

However, he cautions against assuming rapid change in Venezuela.

“What the United States did was we went in and kidnapped the president. But the government installed by that president and his supporters over the last 20 years at the federal, state, and local levels is all intact. The army is intact. The ministries are intact. The cadres are still in place in municipalities and regional jurisdictions. So this regime change that the popular media is talking about as a fait accompli is anything but,” he clarifies.

Even with political shifts, years of deterioration mean production gains would be incremental at best without massive, sustained investment. Rule sees a similar angle regarding Russia, arguing that the war in Ukraine has deepened underinvestment in its oil sector.

“Russians have been the primary violators of the deferred sustaining capital investments. They’ve needed the money for other reasons,” he notes, explaining that if the war stops, Russia will need “billions and billions and billions of dollars” to increase its production capacity.

Price Watch: U.S. Oil Equipment & Services ETF (NYSE:IEZ) is up 8.41% year-to-date.

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