Oil Prices Dip on Prospects of Higher Venezuelan Output
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- Last Updated: 06 Jan 2026 at 5:10 PM IST
As the market anticipated an increase in Venezuelan oil production following the capture of Venezuelan president Nicolas Maduro by U.S. forces over the weekend, oil prices fell by 0.2 percent to $61.62 per barrel on Tuesday, while West Texas Intermediate (WTI) dropped by 0.3 percent to $58.13 per barrel.
Oil traders expect that U.S. sanctions against Venezuela will be relaxed, leading to more Venezuelan crude entering the already saturated and oversupplied oil market. As markets assess the possibility of higher supply from Venezuela over time, the question arises: Will OPEC+ have to decide on what action to take regarding this issue?
How Did Venezuelan Developments Drive Price Action?
The market reaction to the political news in Venezuela resulted from heightened expectations surrounding increased Venezuelan production because of the recent U.S. military intervention in the country to remove Maduro from power.
On Monday, Maduro pleaded not guilty to charges associated with his alleged involvement in drug trafficking and stated that he would continue to fight the charges in court. However, his not guilty plea will have little effect on how much crude he will be able to produce in the future. As evidenced by current oil futures prices and market performance through the end of this month, current estimates of oil prices for 2026 reflect concerns over ample global supply and weak demand, rather than an immediate surge in Venezuelan output.
Venezuela's proven reserves of 303 billion barrels rank it as the largest member of OPEC, but its daily production levels were only 1.1 million barrels per day last year on account of historic investment patterns and trade orders. Trump administration officials will hold meetings with US oil executives this week as they push to quickly accelerate Venezuelan output.
Supply Glut and OPEC+ Response Dynamics
Citi analysts have said that if Venezuela keeps producing more oil, oil prices could fall. Although the OPEC+ producers, led by Saudi Arabia, have stated they will cut back on their production if Brent crude prices go below the $55-$60 range. The brief gathering of the OPEC+ group confirmed that production quotas will remain constant despite the production gain risks from Latin America.
According to Reuters ' December survey, " benchmarked into December's query, supplies are well above the demand levels expected in 2026. The disjointed physical oil market amplifies the factor of financial selling. The Venezuelan barrels could arbitrage into Europe and Asia. The aggressive energy initiative is associated with the Trump administration’s policy to secure the North American energy future by reducing dependence on foreign states in the Middle East.
Strategic Implications for Global Markets
The anticipated increase in Venezuelan oil production could alter the dynamics of OPEC+ discipline, potentially forcing Saudi Arabia to implement deeper production cuts to preserve pricing power amid rising supply growth from the United States and Guyana. The capture of President Maduro could ease political barriers for the return of oil majors, though analysts say meaningful production gains will depend on investment and stability returning to the sector.
As a result of the continued recovery of supply and price stability, Citi has indicated that there are short-term price defence mechanisms for Brent crude if new supply comes on stream.
The market is anxiously awaiting further dialogue between the Trump administration and the OPEC countries to ascertain a time frame whereby the upside potential from Venezuela represents the seaborne oil trade. The question remains: should the expected volumes of oil from Venezuela come to fruition? Will it test the cohesion of OPEC+?
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