The United States’ strikes against Venezuela are not expected to trigger an oil price shock, and analysts say any immediate threat of higher prices would be short-lived if the US increases the country’s oil production.
Within hours of US arm ed forces capturing the Venezuelan president on Saturday, US President Donald Trump announced that America’s oil companies would enter Venezuela and invest in restoring production in the South American country, which has the biggest proven oil reserves in the world.
“We’re going to have our very large US oil companies, the biggest anywhere in the world, go in, spend billions of dollars, fix the badly broken infrastructure, oil infrastructure, and start making money for the country,” Trump said, noting he would retain sanctions on Venezuela’s oil industry.
It was not immediately clear which oil companies Trump was referring to or how soon they would be able to ramp up production.
Venezuela was once an oil-producing powerhouse, but its output plummeted in recent decades because of falling investment and the effect of US sanctions, with its oil production now accounting for less than 1 per cent of global supplies.
However, Venezuela’s oil production is mostly “heavy crude”, which many US refineries are better equipped to refine than “light crude”, making it strategically important for the US.
In 2015, Venezuela produced about 2.5 million barrels of oil a day, but that figure has fallen to just over 800,000 barrels a day.
Before the strikes, the Trump administration had been stepping up a campaign against Venezuela’s oil exports through a maritime blockade and by sanctioning vessels accused of evading curbs aimed at choking off oil revenue and ramping up pressure on Maduro’s regime.
MST Financial energy analyst Saul Kavonic said 800,000 barrels of oil a day was at immediate risk if Venezuelan exports were affected by the conflict, but that a new Venezuelan government could result in renewed foreign investment in oil production.
“Oil prices will jump on the near term risk to supply, but this could be bearish medium term if a new Venezuelan government results in sanctions being lifted and renewed foreign investment in oil supply,” Kavonic said.
“If Trump is successful at effecting regime change to a more mainstream government, then Venezuelan exports could grow towards 3 million barrels in the medium term as sanctions are lifted and foreign investment returns.”
As reported by Bloomberg, Venezuela’s oil infrastructure was not affected by the US attacks, with key facilities such as Jose port, the Amuay refinery and oil areas in the Orinoco Belt remaining operational.
The country is estimated to hold more oil reserves in the ground than Saudi Arabia, and over the past century, it has attracted some of the biggest international operators.
Independent economist Saul Eslake said that in the short term, the disruption was not likely to have much impact on oil prices. “Taking Venezuela’s puny amount of production out won’t make much of a difference,” he said, noting total world oil production was more than 80 million barrels a day.
While a reconstruction of the Venezuelan oil industry was an ambitious and distant prospect, Eslake said traders and investors could act quickly on the assumption that oil supply would increase.
“The market might anticipate that having American companies go in and spend, according to Trump, billions of dollars, putting the industry back on footing, might increase supply,” he said.
Oil steadied on the first trading day of 2026, before the US strikes on Venezuela, as expectations for excess supply helped offset concerns about the geopolitical risks to production in several nations which are part of the Organisation of the Petroleum Exporting Countries (OPEC+).
Brent crude futures settled below $US61 a barrel while West Texas Intermediate settled above $US57.
However, oil prices had slumped in 2025 as both OPEC+ and competitors boosted output while demand growth slowed, with the International Energy Agency forecasting a record glut of about 3.8 million barrels a day for the year.
Key OPEC+ members led by Saudi Arabia, and including Venezuela, were due to meet on Sunday and were expected to reaffirm a decision to pause increases to supply during the first three months of the year.
Eslake said the latest action could have a broader effect on sentiment and economic growth by sparking another bout of uncertainty.
Jessica Amir, market strategist at trading platform Moomoo, said the strikes would probably only have a short-term effect, but may obliquely boost interest in defence stocks.
“2026 is expected to be a year of excess supply, so if there is to be an impact, it will be short term … Geopolitical tension could be an energy theme to watch in 2026, and you might expect defence investments to have another good year,” she said.
With Bloomberg
Millie Muroi is the economics writer at The Sydney Morning Herald and The Age. She was formerly an economics correspondent based in Canberra’s Press Gallery and the banking writer based in Sydney.Connect via Twitter or email.
