Venezuela attack unlikely to shake oil markets in short term

President that of Donald Trump The overthrow of President Nicolas Maduro in oil-rich Venezuela is unlikely to shock energy markets in the near term, analysts told CNBC on Saturday.

Although the scale of the U.S. attack was unexpected, markets had already priced in a conflict with Venezuela that would disrupt oil exports, said Arne Lohmann Rasmussen, chief analyst and head of research at A/S Global Risk Management.

Venezuela, a founding member of OPEC, has the largest proven oil reserves in the world. But the South American nation currently produces less than 1 million barrels of oil per day, which represents less than 1% of global oil production, according to Rasmussen.

It exports almost half of its production, or some 500,000 barrels, Rasmussen said. The conflict also comes at a time when the global oil market is in surplus and demand is relatively weak, a typical trend in the first quarter of the year, he said.

Rasmussen believed that Brent crude prices will only rise by about $1 to $2, or less, when the futures markets open Sunday evening. He predicts Brent will be slightly lower next week than where it closed Fridayor $60.75.

“While this is a huge geopolitical event that you would normally expect to be positive or to push up oil prices,” he said, “at the end of the day, there is still too much oil on the market, and that is why oil prices are not going to skyrocket.”

Analyst Bob McNally of Rapidan Energy said he informed clients before the weekend that about a third of Venezuela’s oil production was at risk. While he did not predict that all of Venezuela’s production would be disrupted, he told CNBC that it would not pose a significant risk to oil markets in the near term.

In 2025, the oil market recorded its biggest annual decline in five years. The global benchmark Brent crude fell about 19% last year, while U.S. crude lost nearly 20%. The market has been under pressure as OPEC+ has increased production after years of production cuts. The United States also produced a record level of just over 13.8 million barrels per day.

Oil prices could fall further as the regime’s toppling raises the possibility of a possible increase in oil production in Venezuela, analysts told CNBC.

Saul Kavonic, head of energy research at MST Financial, estimates that exports could approach 3 million barrels in the medium term if a new Venezuelan government leads to the lifting of sanctions and the return of foreign investors.

“If anything, Venezuela’s future will have a bearish impact on the market, because there’s really no place to go but up,” said energy consultant David Goldwyn, a former senior State Department energy official in the Obama administration.

Currently, the embargo on Venezuelan oil remains in effect, Trump said during a press conference on Saturday. He also said that U.S. oil companies invest billions dollars to rebuild Venezuela’s energy sector. Trump did not provide details on which companies would invest and how, nor did he specify how the United States would temporarily rule Venezuela “with a group.”

Goldwyn said it was difficult to predict whether U.S. oil companies would invest, given the uncertainty surrounding Venezuela’s interim and future governments.

“All we have learned from government transitions in Iraq, Afghanistan and other countries is that transitions are difficult,” he said. “No company is going to want to commit to investing billions of dollars in a long-term operation until they know the terms. And they can’t know what the terms are until you know what the government is going to be.”

Goldwyn added that businesses, including Exxon Mobileare still waiting for the recovery of debts from the Venezuelan national oil company, Petróleos de Venezuela SA (PDVSA).

Rapidan Energy’s McNally said it’s a complicated proposition for U.S. oil companies. Oil producers have not forgotten being kicked out of Venezuela in the early 2000s, when the country expropriated the assets of foreign oil companies, he said. That said, accessing the world’s largest oil reserves would be “tempting” for U.S. oil companies if sanctions were lifted, he added.

But that would require decades of investment and billions of dollars, McNally said. Whether it’s worth it depends on a central question, he said: Does the world need that much oil?

“Until the end of last year, the market consensus was that oil demand would stop growing in four years. It’s over because of electric vehicles, energy efficiency policies and climate change policies,” McNally said.

But as the United States and other countries, including China and Canada, weaken their climate policies and sales of electric vehicles fall, the prospect of investing in Venezuela has become much more attractive.

“All of a sudden you start saying, ‘Whoa, we’re going to need more oil,'” he said.

— Additional reporting provided by CNBC’s Victor Loh