Oil prices stabilize as traders monitor developments in Venezuela

Crude oil prices stabilized during trading on Monday as traders closely monitored political developments in Venezuela following the US raid and the arrest of Venezuelan President Nicolás Maduro.

West Texas Intermediate (WTI) crude futures pared most of their early losses, trading near $57.20 a barrel. Brent crude also recovered some of its losses and is currently trading around $60.60 a barrel, as investors assess the potential impact of these developments on global oil supplies.

Limited impact on Venezuelan oil supplies in the near term

Markets are currently focused on whether the radical political shift in Venezuela will lead to disruptions in oil production, especially given that the country possesses the world's largest proven crude oil reserves.

Experts believe that the US intervention may accelerate some geopolitical shifts in the region, but it does not currently have significant direct economic repercussions for energy markets.

Why the limited impact on prices?

The relative resilience of oil prices in the face of this geopolitical crisis stems from several key factors:

- A sharp decline in Venezuelan production: Despite its vast reserves, Venezuelan production has fallen to less than one million barrels per day, representing less than 1% of global supply.

Consequently, any disruption to this already limited production has a marginal impact on the global market, which is currently well-stocked.

- No direct targeting of oil infrastructure: According to initial reports, the military strike did not cause direct damage to the country's main oil production or refining facilities.

Sources at the Venezuelan state oil company (PDVSA) also reported that operations are proceeding normally.

- A global supply surplus: The market is already operating with expectations of a significant supply surplus, potentially reaching 3.8 million barrels per day by 2026, according to the International Energy Agency.

This surplus enhances the market's resilience to absorbing partial shocks.

Potential Upside Risks if Sanctions Tighten

Some analysts warn that oil prices could rise later this year if the United States intensifies its pressure on other major oil producers, particularly Iran, potentially tightening global supply.

Reports also indicate that Washington is seeking to encourage US oil companies to contribute to the revitalization of Venezuela's energy sector, which could alter the supply equation in the medium term.

OPEC+ Supports Oil Price Stability

Meanwhile, OPEC+ reaffirmed its commitment to maintaining production levels during the first quarter, providing further support for oil price stability and mitigating sharp market volatility.

Oil Price Outlook for the Coming Period

• Short-Term Upside Factors: Political uncertainty in Venezuela, which could lead to export disruptions and a lack of clarity regarding payment mechanisms for buyers, could push prices slightly higher in the near term. Some analysts anticipate a potential increase of around $3 per barrel.

• Medium- and long-term downside factors: Developments toward regime change and the lifting of US sanctions could lead to a return of foreign investment and a gradual increase in Venezuelan production. Lifting sanctions could allow production to increase by hundreds of thousands of barrels per day within 12 months in the best-case scenario. However, Venezuela's oil sector will require years of massive investment to repair its dilapidated infrastructure before any real recovery can occur.