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Oil prices wavered in early trading after the US operation to oust Venezuelan president Nicolás Maduro created uncertainty over the future of the world’s largest crude reserves.
Brent, the international oil benchmark, fell as much as 1.2 per cent to $60 a barrel shortly after the open on Sunday evening in London. It later turned modestly higher to trade at $61.21.
Venezuela produces less than 1 per cent of global oil output, with exports constrained by US sanctions and a naval blockade. But the country holds about 17 per cent of the world’s proven crude reserves, according to the US Energy Information Administration, giving it the potential to increase supply significantly.
Traders now have to assess what the impact of the US intervention will be on the oil market, at a time when analysts are warning of an approaching glut of crude.
Amrita Sen, founder of consultancy Energy Aspects, said the prevailing assumption was that US intervention would depress prices as markets anticipated additional Venezuelan barrels eventually returning.
“People are going to assume there’s going to be a lot more oil in the medium term,” she said.
Saul Kavonic, an analyst at MST Financial, said traders had grown tired of “geopolitical risk considerations that do not end up translating to real supply disruption”.
Most analysts expect oil prices to decline in the early part of this year, after a 20 per cent fall in 2025, to Brent crude’s current level just above $60 a barrel. “The market is as bearish as it has been for at least a decade,” Sen said, citing record short positions in Brent crude and historically low long positions in US benchmark WTI.
While there might be more oil from Venezuela in the medium term, there was unlikely to be a significant increase in the short term, she added. “Exports have already halved and the blockade and sanctions remain in place, so you’ve a situation where nothing has changed, there is no additional oil.”
Despite the upheaval in Venezuela, Opec+ signalled no immediate shift in strategy at a scheduled update on Sunday. Eight members of the producer group, including Saudi Arabia, Russia and the United Arab Emirates, met briefly and agreed to maintain their pause on production increases until at least April.
In the short term, Venezuela’s oil output could fall further. The blockade has sharply restricted imports of the feedstocks required to blend the country’s heavy crude for export, tightening operational constraints. Reuters reported on Sunday that state-owned oil company Petróleos de Venezuela (PDVSA) had asked some joint venture partners to scale back production.
“We have identified at least 200,000 to 300,000 barrels a day that have already been shut in, and it could be more,” Sen said. “In the very short term, the risk is that we lose even more production.”
US stock market futures ticked higher after the market opened on Sunday. S&P 500 futures were up 0.1 per cent, while Nasdaq 100 futures rose 0.2 per cent.
“Risk markets in the short term tend to vote on whether a worst-case scenario is becoming more or less likely,” said Edward Al-Hussainy, a portfolio manager at Columbia Threadneedle. “In Venezuela’s case, we look to have avoided full-scale war and that may be enough to support risk at the open this week.”
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