The United States is set to become “very dynamically” involved in Venezuela’s oil sector following the operation to arrest the country’s leader, Nicolás Maduro, President Donald Trump said on Fox News on Saturday 3 January 2025.
As he characteristically noted: “We have the largest oil companies in the world, the strongest, the best, and we are going to get very actively involved in this.”
With this move, the US President opens the country’s vast reserves to American companies that will control to a significant extent the global supply of “black gold”.
On the other hand, he takes a symbolic revenge for the seizures of American assets by the Bolivarian Republic, while sending a signal to China and Russia that he seeks to hold a dominant position in the energy sector.
At a press conference later, referring to Venezuela’s vast oil reserves, he pointed out:
“We will send our very large American oil companies, the largest in the world, to invest billions of dollars, repair the severely damaged infrastructure, the oil infrastructure, and begin generating revenue for the country.”
The strangulation of exports
The United States has recently escalated pressure on the government of Venezuela with a series of measures aimed at strangling the country’s vital oil exports, including the interdiction of oil tankers carrying sanctioned crude to and from the country.
President Donald Trump and senior administration officials state that their main objectives are to stem the flow of illegal drugs from the country and to achieve regime change.
For decades, American companies dominated Venezuela’s oil production, before most saw their operations expropriated in the early 2000s.
Trump and White House Deputy Chief of Staff Stephen Miller have stated that this history is a motive for the increasing aggressiveness of the United States.
Officials of Venezuela say that American intentions are clear: the seizure of the country’s oil reserves, the largest in the world.
The incidents - Sanctions and ship seizures
What actions have the United States taken to restrict Venezuela’s oil exports?
American forces intercepted and seized an oil tanker off the coast of Venezuela on 10 December.
The vessel was reportedly sailing under the flag of Guyana, but the country’s Maritime Authority denied any connection. The tanker had been sanctioned by the United States in 2022 for supporting Iranian oil exports.
The White House said that the United States intends to retain the oil aboard the seized vessel.
Washington also imposed new sanctions on six ships carrying Venezuelan oil, forcing tankers to turn back away from the Latin American country.
Overall, the United States has sanctioned more than 100 tankers.
Later, Trump announced the blockade of sanctioned tankers.
Oil exports are Venezuela’s main source of revenue.
Beyond measures to restrict oil exports, the United States has deployed warships, aircraft and troops near Venezuela and has carried out air strikes against small vessels in the area which, according to American officials, belonged to drug cartels.
Trump has hinted that the Pentagon may proceed with ground strikes as well.
What is the impact of recent developments?
Venezuela has exported on average about 630.000 barrels of crude per day this year, according to Bloomberg data.
The blockade is likely to directly affect about 500.000 barrels per day.
The high risk of seizure means tanker operators will be reluctant to risk the loss of a vessel.
The country’s crude production may soon be disrupted due to a shortage of imported naphtha.
Naphtha is a term used in the oil industry for light, flammable hydrocarbons that are liquid at room temperature and can be used in various ways.
A tanker carrying naphtha to Venezuela turned back after the seizure of a tanker carrying crude.
Is it likely that the United States will seize oil assets?
The government of Venezuela stated that “these are national natural resources”.
The Trump administration has not explicitly stated that the United States will seize oil assets, although Trump has said the blockade will continue until “everything that was stolen is returned”.
In a post, Stephen Miller described the expropriations as “the largest theft of American wealth”.
What condition is Venezuela’s oil industry in today?
Production has fallen by more than 70% since the late 1990s. Venezuela is now ranked 21st globally and is expected to be overtaken by Guyana and Argentina.
Despite the problems, oil remains the country’s main source of revenue.
Foreign companies operating.
Chevron Corp remains the only American company. Also present are Repsol (Spain), Eni SpA (Italy) and Maurel et Prom SA (France).
Sanctions have discouraged Russia and China.
Rosneft transferred its assets, while CNPC maintains a limited presence.
Who are the largest buyers?
China is the largest buyer, through independent refineries in Shandong province.
In addition, specialized refineries in the United States process heavy grades of Venezuelan crude.
Will oil prices rise?
Oil prices are expected to see a limited impact following the United States’ attack on Venezuela and the arrest of President Nicolás Maduro.
Despite military actions and tanker blockades, analysts estimate that the global oil market remains oversupplied, reducing immediate pressure on prices.
Giovanni Staunovo of UBS underlined that Venezuela’s exports and production are under pressure, but it is too early to predict developments. Vandana Hari of Vanda Insights stressed that immediate market impacts will be small, limited to a slight increase in the country’s risk premium.
The drop in production by about 25% due to sanctions and blockade affects prices only marginally, according to Amrita Sen of Energy Aspects, because large crude inventories absorb the shock.
At the same time, unplanned production outages in Venezuela, Russia and Kazakhstan increase future uncertainty, but the overall impact on prices remains moderate.
Amena Bakr of Kpler noted that markets underestimate Venezuela’s geopolitical risk, but excess supply limits price increases.
The country’s heavy crude grades are not easily replaced, which could exert medium term pressure on refined product prices, but not at a level that would dramatically change the global market.
Vijay Valecha of Century Financial explained that Venezuela’s contribution to the global energy balance is small, with a potential loss of 0,7–1 million barrels per day out of 100 million barrels of global production, which limits the immediate impact on prices.
However, the market is closely monitoring geopolitical developments, as any further escalation could cause greater instability and modest upward pressure.
Overall, oil prices remain stable to slightly higher, with geopolitical risk functioning mainly as a limited factor of concern due to global oversupply and the limited significance of Venezuela’s production in global trade.
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