Oil prices edged lower on Monday (Jan 5) after a dramatic United States military operation in Venezuela raised the prospect of increased crude supply from the OPEC nation with the world’s largest proven oil reserves, deepening concerns about a global oversupply.
In early Asian trading, Brent crude futures slipped 0.21 per cent to US$60.62 a barrel, while US West Texas Intermediate (WTI) fell 0.35 per cent to US$57.12 a barrel. Both benchmarks pared some earlier losses but remained under pressure after news that US forces had seized Venezuelan President Nicolas Maduro over the weekend.
The United States launched a surprise assault on Caracas in the early hours of Saturday, striking key military targets before extracting Maduro and his wife and transferring them to New York to face long-standing federal narcotrafficking charges. The operation marked a historic escalation in Washington’s confrontation with the socialist government that has ruled Venezuela for more than two decades.
Markets reacted swiftly, focusing less on the geopolitical shock and more on the potential implications for oil supply. Traders and analysts said that a US-controlled transition in Venezuela could eventually unlock higher oil exports, adding fresh barrels to an already saturated global market.
“Any sign that Venezuelan crude could return more freely to international markets is being read as bearish for prices,” said one Singapore-based oil trader. “The market is already struggling with too much supply and not enough demand growth.”
US President Donald Trump said on Sunday that the United States would now “run” Venezuela and send American companies to repair and modernise the country’s badly dilapidated oil infrastructure. He argued that years of sanctions, mismanagement and corruption under Maduro had crippled an industry that should be producing far more crude.
Venezuela currently pumps around one million barrels per day, according to industry estimates, a fraction of the roughly 3.5 million barrels per day it produced in 1999, before the late Hugo Chávez ushered in sweeping state control of the oil sector. The collapse in output has been driven by chronic underinvestment, the departure of foreign partners, US sanctions, and the deterioration of refineries, pipelines and export terminals.
In theory, Venezuela’s vast reserves mean it could eventually become a major source of incremental supply. However, analysts caution that any meaningful recovery in production would be slow, costly and politically complex.
“Any recovery in production would require substantial investment given the crumbling infrastructure resulting from years of mismanagement and underinvestment,” UBS analyst Giovanni Staunovo told AFP. “This is not something that can be fixed in months.”
Energy experts note that even if sanctions were fully lifted and international oil companies were allowed back in, rebuilding Venezuela’s oil industry would take years. Skilled workers have fled the country, equipment is obsolete, and many oilfields have suffered irreversible damage.
Moreover, the broader market environment offers little incentive for rapid investment. Oil prices have fallen in recent months amid a global supply glut, driven by resilient US shale output and steady production from major exporters, even as demand growth remains sluggish.
Crude prices declined through much of 2025 despite headwinds that would normally support higher prices, including President Trump’s escalating tariff war and the prolonged conflict in Ukraine. Weak economic growth in key consuming regions, particularly China and Europe, has capped demand.
For now, traders appear to be pricing in the possibility rather than the certainty of higher Venezuelan supply. “This is more about sentiment than actual barrels hitting the market,” said the Singapore trader. “But in a market like this, sentiment matters.”
As geopolitical shockwaves from Caracas continue to ripple through global markets, oil investors are likely to remain cautious, balancing the long-term potential of Venezuela’s reserves against the near-term reality of oversupply and fragile demand.
