Analysts: Venezuela attack will not threaten oil market; its share of production is small

The oil market remains calm after the US attack in Venezuela, and a sharp rise in fuel prices is not expected as a result. Venezuela does have the world’s largest oil reserves, but its production has been declining for a long time due to sanctions and outdated technology, and accounts for less than one percent of global output. Any potential disruption to exports from Venezuela would therefore have only a minimal impact on trading in oil and fuels. This is according to comments by analysts to the Czech News Agency (ČTK). On Saturday, the US carried out extensive airstrikes in Venezuela, detaining and removing its authoritarian president, Nicolás Maduro.

Venezuela has proven reserves of 303 billion barrels of oil, representing up to 17 percent of the world’s total. It is followed by countries such as Saudi Arabia, Iran and Iraq. Its reserves are also significantly larger than those of the United States, which had more than 45 billion barrels of proven oil reserves at the end of 2024, according to the statistical yearbook of the Organization of the Petroleum Exporting Countries (OPEC).

Saturday’s attack did not cause any chaos in the oil market, said Portu analyst Marek Malina. “In fact, North Sea Brent crude and WTI crude are both down more than one percent today,” Malina noted. This continues the decline in oil prices seen in previous weeks; oil has become four percent cheaper over the past month.

He noted that oil production in Venezuela has been falling sharply for a long time under the current regime because of sanctions and outdated technology. “Today it stands at less than one million barrels a day, which is less than one percent of global production. It exports only about half of its output, or around 500.000 barrels,” Malina said. He added that any potential disruption to exports from Venezuela would therefore have only a minimal impact on global oil trade. “Especially at a time when the market is oversupplied due to rising production by the OPEC+ alliance and the US,” Malina said.

“Given Venezuela’s substantial oil reserves, it is logical that everyone is focusing on this market after the US action over the weekend. The fact is, however, that Venezuela’s oil sector is outdated, underfunded and plagued by very poor infrastructure,” said another Portu analyst, Jan Berka.

He also said that significant market fluctuations are unlikely in the near future, including any positive moves towards lower prices. “A substantial increase in production would require even more substantial investment. Neither would happen at the snap of a finger in this case,” Berka noted.

Despite this, the current situation is affecting the shares of major oil producers such as Chevron and Exxon, which are rising today, XTB analyst Tomáš Cverna noted. He said that the situation is opening up opportunities for strategic investment in Venezuela’s oil infrastructure in the future, and these major companies are ready to take advantage of them.

Jaroslav Ton, head of Malcom Finance, also pointed to Venezuela’s relatively marginal position in oil production. “Even a hypothetical complete loss of Venezuelan oil could therefore be relatively easily replaced by spare capacity from other producers,” Ton said.

Rather than the price of oil itself, he sees a potential risk for Czech transport operators in the technical constraints of refineries. If supplies of heavy Venezuelan crude, which is ideal for diesel production, were disrupted, production efficiency could decline. Refineries would produce more gasoline, for example, but less diesel from a barrel of lighter US crude.

Venezuela produced the most oil in the 1970s, when output reached as much as 3.5 million barrels a day. Production began to fall after the oil sector was nationalized in 1976. By 2020, it had dropped to less than 550.000 barrels a day. One barrel is 159 liters. The decline in production accelerated after socialist president Hugo Chávez took office in 1999 and deepened further under President Maduro. Last year, production was estimated at around 950.000 barrels a day, the website of CNBC reports, citing data from Lipow Oil Associates. Venezuela exports most of its oil to China, using it to repay long-term loans.