‘Why Venezuela’s political upheaval may not disrupt oil market’

The capture of Nicolás Maduro by the United States government and Wednesday’s ploy to harness Venezuela’s oil assets won’t cause a significant impact on the global oil market, analysts and commentators have observed. Dr. Muda Yusuf, the Chief Executive Officer of Centre for Promotion of Private Enterprise (CPPE) attributed the development to the fact that […]

The capture of Nicolás Maduro by the United States government and Wednesday’s ploy to harness Venezuela’s oil assets won’t cause a significant impact on the global oil market, analysts and commentators have observed.

Dr. Muda Yusuf, the Chief Executive Officer of Centre for Promotion of Private Enterprise (CPPE) attributed the development to the fact that Venezuela’s current oil output is extremely low—accounting for less than one percent of global oil production. 

US President Donald Trump had Wednesday said Venezuela would give between 30 and 50 million barrels of oil to the US.

Trump, in a post on Truth Social, said the oil will be sold at market value and controlled by the US for the “benefit of the people of Venezuela and the United States.”

“I am pleased to announce that the Interim Authorities in Venezuela will be turning over between 30 and 50 MILLION Barrels of High Quality, Sanctioned Oil, to the United States of America.

“This Oil will be sold at its Market Price, and that money will be controlled by me, as President of the United States of America, to ensure it is used to benefit the people of Venezuela and the United States!” The export is worth over $2 billion.

Muda in a chat with Daily Trust, said years of underinvestment, operational inefficiencies, sanctions, and institutional collapse have severely weakened the country’s oil sector. 

He explained that on account of this, Venezuela no longer plays a material role in influencing global oil supply dynamics.

The recent attack and the circumstances surrounding Maduro’s capture did not damage Venezuela’s oil production infrastructure, he said, adding that oil output is expected to remain broadly unchanged in the short term.

According to him, Venezuela’s limited production capacity, the global oil market is presently well supplied. 

“This supply cushion means that even if Venezuela were to experience some level of production disruption, it would not translate into any meaningful impact on global oil prices. Current market fundamentals are therefore resilient enough to absorb any marginal shocks from Venezuela.

“That said Venezuela remains strategically significant in the longer term. The country holds one of the largest proven oil reserves in the world—about 18 percent of global reserves. 

“This resource base gives Venezuela substantial latent potential. If the current political developments do not escalate into prolonged instability, and if Donald Trump follows through on indications that American oil companies could re-enter the Venezuelan oil sector, the country’s oil output could gradually recover.

“However, such a turnaround would occur only in the medium to long term. Rebuilding production capacity would require significant capital investment, technical expertise, regulatory clarity, and time. Any supply boost from Venezuela, therefore, would not be immediate and should not be factored into short-term oil market expectations.”

Oil prices dropped on Wednesday morning, on fears of a supply increase after US President Donald Trump said Venezuela will send up to 50 million barrels to the United States.

A barrel of North Sea Brent for delivery in March fell on Wednesday morning by 56 cents, or nearly 1 per cent, to 60.14 dollars, after the price fell by nearly 2 per cent on Tuesday.

The price for a barrel of US grade WTI for delivery in February fell by 73 cents, or 1.3 per cent, to $56.40.

As of the time of filing this report, the price had slipped to $59.90 for Brent and $55.93 for WTI.

The President of the Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN), Dr. Billy Gillis-Harry, also told Daily Trust that the upheaval won’t disrupt the global oil market.

He said Trump’s action on the Venezuelans oil is not beneficial to the global oil industry.

He faulted Trump for targeting the country’s oil assets under the guise of its president’s involvement in drug trafficking.