Oil prices have fallen following a US military operation that resulted in the seizure of Venezuelan leader Nicolas Maduro, whose country holds the world’s largest proven crude reserves. The potential increase in Venezuelan oil supply has raised concerns of oversupply, putting further pressure on oil prices, which have been declining in recent months.
As of morning trade in Asia, Brent Crude was down 0.21 percent at $60.62 per barrel, while West Texas Intermediate decreased by 0.35 percent to $57.12 per barrel, both recovering from earlier lows. The US military operation, which involved bombing military targets and taking Maduro and his wife into custody to face federal narcotrafficking charges in New York, has significant implications for the global oil market.
US President Donald Trump has announced plans for the United States to “run” Venezuela and send US companies to repair its oil infrastructure, which has suffered from years of underinvestment and sanctions. Currently, Venezuela’s oil production stands at around one million barrels per day, a significant decline from its 1999 output of 3.5 million barrels per day.
However, analysts caution that substantially increasing Venezuela’s oil production will not be an easy or quick task. According to UBS analyst Giovanni Staunovo, “any recovery in production would require substantial investment given the crumbling infrastructure resulting from years of mismanagement and underinvestment.” The country’s oil industry faces significant challenges, including a lack of investment and a supply glut that has weighed down oil prices.
The decline in oil prices can be attributed to various factors, including a supply glut and significant growth headwinds such as the ongoing tariff war and the conflict in Ukraine. Despite these challenges, the potential increase in Venezuelan oil supply is likely to have a significant impact on the global oil market. As the situation in Venezuela continues to unfold, the international community will be closely monitoring the developments and their implications for the global economy.
