The oil markets have not had an easy start to 2026. Analysts had expected the worst of the geopolitical pressures to have been left behind in 2025. However, with the US capture of Venezuela’s President Nicolas Maduro and his wife, and Washington’s takeover of the country’s oil assets, markets have entered uncharted territory.
It has been 23 years since the US last governed another oil-producing nation. The invasion of Iraq notably altered the trajectory of the country’s position in the global energy industry. Baghdad’s invasion of Kuwait in 1990 was also a destabilising moment for global oil markets, triggering supply disruptions, volatility and a reshaping of energy geopolitics that reverberated well beyond the Gulf. At the time of writing, the US has negotiated a $2 billion sales agreement for Venezuela’s oil, within days of deposing the country’s President. The US has never moved as swiftly to monetise another country’s oil assets following an intervention. In Iraq, production recovery took years and was largely driven by the country’s own industry, following sustained damage from sanctions, war and subsequent instability.
Within Venezuela, opinions are divided. While some, as in Iraq, are celebrating the ousting of a controversial leader, many remain uncertain over the future of the country, which has the world’s largest reserves of oil. For a country long defined by its resources, the fate of those oil reserves may now shape not just its recovery, but its sovereignty.
What’s at stake for Venezuela?
Brief summary
- On January 3, the US took control of Venezuela’s oil assets following the capture of President Nicolas Maduro.
- Venezuela holds the world’s largest proven oil reserves (300 billion barrels), which is equivalent to 17 per cent of the world’s total. Production, however, remains severely constrained
How much oil is Venezuela producing now?
- Current output: 800,000 barrels per day (bpd), according to Kpler
- This is down sharply from 2.4 million bpd in 2015 and more than 3 million bpd at its peak in the late 1990s
How high could production rise if sanctions are lifted?
Kpler estimates suggest output could reach 1.2 million bpd by end-2026 if sanctions are fully lifted. Venezuela would need to see the following happen over the next 12 months:
- Incremental output of 300,000-400,000 bpd within 12 months
- The potential restart of the Petrocedeno upgrader, which converts extra-heavy crude into lighter, export-ready grades
Venezuelan production is largely heavy Merey crude from the Orinoco Belt. Without upgrading, this crude is harder to transport and sell at scale. Restarting Petrocedeno would unlock stranded barrels already in the system. US Gulf Coast refineries are among the few globally equipped to handle Merey. This makes the US the most immediate and viable destination for increased Venezuelan exports.
What supports the initial rebound in Venezuelan output?
- Workovers in the Maracaibo Basin, a mature producing region.
- Operations are largely state-controlled, with US oil major Chevron operating via joint ventures with state-run PDVSA.
- Supply growth is expected to slow after the initial uplift.
- Gains beyond 2026 become progressively harder and more capital-intensive.
- A larger increase would require the restart of idle upgraders, including Petromonagas and Petro Roraima in the Orinoco heavy oil belt in Anzoategui state, eastern Venezuela.
- This would lift capacity to 1.7 million-1.8 million bpd with the addition of 800,000–900,000 bpd by 2028
- Rystad estimates $110 billion in upstream investment needed to lift production from 1 million bpd to 2 million bpd by 2030
What is the US’s role in monetising the oil?
- US President Donald Trump said he plans to meet US oil companies soon.
- The US could sell 30 to 50 million barrels of Venezuelan crude initially.
- Proceeds, estimated at $2 billion, would be managed under a US-led framework rather than by PDVSA alone.
What is the impact on oil prices?
- So far: limited impact
- The world is awash with oil and traders remain sceptical about how quickly Venezuelan barrels can return
- Other sanctioned barrels such as Iran Heavy and Russian Urals will replace Venezuelan heavy crude
- US Gulf coast refiners will absorb any incremental Venezuelan heavy crude
- If Venezuela becomes more competitive in the future, it will give tough competition to Iranian and Russian barrels
- Venezuela’s predicament also creates challenges within OPEC, of which it is a founding member
- The OPEC+ alliance is keeping output unchanged and already unwinding 1.65 million bpd of voluntary cuts.
Bottom line: Even with the world’s largest reserves, Venezuela’s near-term impact on oil markets is measured in hundreds of thousands of barrels, not in millions. The numbers suggest recovery will be gradual, not transformative, in 2026.
Jargon buster
Upgrader: A heavy oil upgrader transforms very thick, dense crude into lighter, more easily refined oil. Heavy crude is too viscous to flow through pipelines efficiently and is harder for refineries to process, An upgrader "cracks" and refines it into grades that can be sold on the global market. Venezuela has several upgraders that need to be revamped in order to become a reliable supplier in the global oil markets.
Big number
300 billion barrels
The size of Venezuela’s enormous oil reserves
Happening this week
- Abu Dhabi Sustainability Week: Jan 11-15
- Irena National Assembly: Jan 11-12
- World Future Energy Forum: Jan 13-15
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