Venezuela’s Falling Crude Supply Won’t Budge Global Oil Market

The global oil market appears robust enough to handle disruptions from Venezuela, even though the country holds the world's largest crude oil reserves.

Recent tensions between the U.S. and Venezuela, including a tanker seizure and increased U.S. sanctions against Nicolas Maduro and his allies, have significantly reduced Venezuelan oil production, reaching a seven-month low.

The International Energy Agency (IEA) estimates that Venezuela's oil supply in November was at 860,000 barrels per day (bpd), a decrease from 1.01 million bpd in October and levels above 1 million bpd in September. September's output was the highest since February 2019.

Further declines are anticipated in December following U.S. actions in Caribbean waters. Reuters reported last week that the U.S. is prepared to seize additional tankers carrying Venezuelan crude, citing unnamed sources who indicated a list of targeted vessels already exists. A tanker was seized earlier this month.

Even with the U.S. actions, the global market's current oversupply should easily compensate for the drop in Venezuelan output. Columnist Ron Bousso, citing Reuters estimates, suggests that even in a worst-case scenario, Venezuela's crude production might fall by up to 500,000 bpd due to restrictions and a shortage of diluents needed for heavy crude exports.

Venezuelan Scenarios

Heading into 2026, Venezuela remains a wild card in the global oil market. Uncertainty surrounds potential U.S. intervention and its potential impact on oil production.

Rystad Energy suggests that a U.S. military intervention leading to a loss of Venezuelan oil production would significantly impact global benchmark prices, as the market would need to replace Venezuela's heavy crude, which constitutes the majority of Caracas's crude exports.

Rystad Energy also noted that if the U.S.-Venezuela tensions escalate into a U.S. incursion, this volume of crude would be at risk, depending on the scale of military activity. The firm highlighted the unique quality of Venezuelan crude, noting that over 67% of the output is heavy.

The overall tightening of the global heavy oil market would increase prices for the heavy grades that the U.S. imports, especially Canadian heavy crude grades. Rystad Energy anticipates that a temporary loss in Venezuelan production would also push up the price of the sour Dubai benchmark against ICE Brent as Asia seeks to replace the lost Venezuelan barrels.

According to Rystad Energy, potential replacements for Venezuela's flagship super heavy grade Merey could include Canadian heavy oil, heavy grades produced in the U.S. Gulf of Mexico, and Colombian blends such as Castilla, Apiay, Magdalena, and Mares.

While the possibility of a U.S. incursion remains uncertain, a change in the Maduro regime could significantly alter Venezuela's oil production, U.S. access to Venezuelan heavy crude suitable for U.S. Gulf Coast refineries, and U.S. influence in the Western Hemisphere and Latin America.

Wood Mackenzie stated earlier this month, "It is not clear that the US will push for regime change in Venezuela, or how such an attempt might play out if it did."

Escalating tensions might lead to a short-term squeeze in Venezuela’s supply. That said, the reality is a bit more complicated. a regime change could lead to the easing of U.S. sanctions, renewed foreign participation, and an increase in Venezuela’s crude oil production.

Wood Mackenzie analysts believe that if sanctions were lifted and Venezuela received desperately needed operational and financial support, it could significantly impact the country's production in both the short and long term.

Adrian Lara, Wood Mackenzie’s principal analyst for Latin America upstream, suggests that improved operational management could lead to quick increases in production. "Our assumption is that there are a lot of wells that just need a workover," Lara says. "You can boost production through opex, without needing much new capex."

WoodMac estimates that under favorable conditions, operational improvements and modest investment in the Orinoco Belt could restore Venezuela's production to mid-2010s levels of around 2 million bpd within one to two years.

Before any boost occurs, the global oil market will have to deal with lower Venezuelan supply in the coming weeks and months. That said, the reality is a bit more complicated. this may not be a negative factor, considering the anticipated oversupply in the market, particularly in the first quarter of 2026.

Most investment banks project Brent crude prices to average below $60 per barrel next year, with even lower WTI prices, due to expectations of a large oversupply.