Wall Street takes the lead in Venezuela's oil prospects: the path to recovery in production is blocked, and supply shocks are limited in the long and short term

The Zhitong Finance App learned that the US arrested Venezuelan President Nicolas Maduro last weekend. Since then, the focus has turned to how quickly the country with the world's largest proven crude oil reserves can increase production. Although US President Donald Trump said that in the long run, US companies will invest billions of dollars to rebuild the country's energy infrastructure, the market has major doubts about whether large oil companies are willing to invest in such an uncertain environment.

In the short term, it is unclear how much oil Venezuela can export and whether its oil delivery to China will continue.

Here's what analysts are saying about Venezuela:

Royal Bank of Canada Capital Markets

Analyst Halima Croft and others said in a report: “There is no doubt that some people in the market will accept the 'mission complete' statement and will easily include the path to returning production to 3 million barrels per day into the forecast.” They added that if power is transferred in an orderly manner, the complete lifting of sanctions could release hundreds of thousands of barrels of production per day within the next 12 months.

However, they noted, “At the time of writing, the situation is still very unstable, but we continue to remind market observers that the country's recovery path will be long.”

Kaitou Macro

Chief economist Neil Shilling said in a report: “In theory, Venezuela could once again become a major oil producer: it still claims to have the world's largest proven oil reserves. However, the difference between theory and reality is huge. At least, after Maduro's arrest, Venezuela's geopolitical alliances remain unclear.”

Shilling said that even if production were to rise back to the level of about 3 million barrels per day ten years ago, this would only increase global oil supply by about 2%.

Goldman Sachs Group

Analyst Dan Struivan and others said in a report that if Venezuelan crude oil production falls by 400,000 barrels per day by the end of this year, the price of Brent oil may be 2 US dollars higher than Goldman Sachs's basic forecast of 56 US dollars per barrel for Brent oil this year. Conversely, if production were to increase by 400,000 barrels per day, it could be $2 lower.

Goldman Sachs said, “Coupled with recent Russian and US production exceeding expectations, Venezuela's long-term production may be higher, which further increases the downside risk of our oil price forecast for 2027 and beyond. We estimate that in a scenario (that is, Venezuelan crude oil production will reach 2 million barrels per day in 2030, compared to 900,000 barrels per day in the bank's previous basic forecast), oil prices will have room to decline by $4 per barrel in 2030.”

Global risk management

Chief analyst Arne Roman Rasmussen said the market response may be limited due to sufficient global oil supply. “Venezuela is famous for having the world's largest proven oil reserves, over 300 billion barrels,” he said in a report. However, reserves are one thing; production is another. Venezuela currently produces around 1 million barrels of oil per day.”

Rasmussen said that since Venezuelan crude oil is a heavy high-sulphur crude oil, only some refineries in the US and China can process it, adding that the potential loss of such oil is not a particularly difficult issue for the global market.