How Venezuela will affect the potential structural shortage of oil. Analysis
This week, the Venezuelan parliament discussed a bill that would weaken state control over the oil sector for the first time since the nationalization of enterprises under President Hugo Chavez in 2007. The reform promises new opportunities for private companies that will be able to invest in the energy sector. What global effect is expected from the recovery of the Venezuelan oil industry, whether it will affect a possible structural deficit, and what will happen to Russian companies if the surplus predicted by analysts turns out to be only on paper—
What are the prospects for Venezuelan mining
Venezuela's proven oil reserves amount to over 300 billion barrels and are recognized as the largest in the world (17% of the total reserve). At the same time, in December, the country produced almost 900 thousand barrels per day, which is less than 1% of global production. In 2002, the figure was the maximum — about 3 million barrels, in 2020 — the minimum — 337 thousand barrels. For comparison, Saudi Arabia produced 10 million barrels per day in December. That is, although Venezuela looks like a source of gigantic supply, in fact it is not: its reserves mainly consist of heavy and superheavy oil, and it is expensive to extract it. We need specialized drilling equipment, installations for processing heavy oil into export-friendly raw materials, constant well maintenance, and diluents. Venezuela currently does not have a well-functioning system for the extraction, processing and transportation of large volumes of oil. Analysts estimate that rebuilding the industry will require ten years of work and investments of $80-100 billion, subject to political stability. However, even under the most optimistic scenario — a return to production levels of 3 million barrels per day — global oil supplies will grow by only about 2%.
It was $100 billion that US President Donald Trump called on global oil companies to invest in restoring Venezuela's energy infrastructure. At a meeting in January with the heads of Exxon Mobil, ConocoPhillips, and Chevron Corp, the White House host said that oil production could be increased to unprecedented levels. Exxon and ConocoPhillips left Venezuela almost 20 years ago after the nationalization of assets and are still not very optimistic about Trump's idea. But Chevron, which is the only major American oil company operating in the country, showed interest.
In January, Trump, with whose approval the operation to capture Venezuelan President Nicolas Maduro was carried out, announced that Caracas would transfer from 30 to 50 million barrels of oil (according to unofficial data, already produced) to Washington, which would be sold at a market price. If the United States finds buyers, they can raise up to $2.75 billion. However, the export of such a volume of oil can significantly hit the market, depending on the size of the shipments that the United States will put up for sale on a daily basis. If you sell, for example, 2 million barrels per day, the market will temporarily turn into a conditional surplus. And oil prices may drop to $40 per barrel. You will have to recover from a month to a quarter. For comparison, the noticeable effect on oil prices from the actions of President Joe Biden, who released 180 million barrels from the US Strategic Oil Reserve in 2022, lasted about three quarters. Then the price of Brent from $ 120 per barrel dropped below $ 90.
Why is the surplus "paper"
According to analysts, $40 per barrel is a very real price, which may be affected by a misinterpretation of events. Market participants may think that the short-term imbalance that has developed due to the release of Venezuelan oil to the market is actually a structural surplus, which Western analysts consistently predicted due to the recovery in OPEC+ production and production growth in Guyana, Brazil, and Argentina.
After ramping up production last year, eight OPEC+ countries — the associations of countries that produce about half of the world's oil — confirmed that they would not increase production in January, February and March.
Thus, according to estimates by the Energy Information Administration (EIA) of the US Department of Energy, last year global production increased more than consumption (+2.9 million barrels per day versus +1.2 million), which led to an increase in global reserves. The trend is expected to continue this year and next. As a result, the spot price for Brent crude oil will average $56 per barrel in 2026 and $54 per barrel in 2027. The International Energy Agency (IEA) also predicts a surplus — in the first quarter of 2026, global oil supply may exceed demand by 4.25 million barrels per day. At the same time, the market expects a surplus of 3.7 million barrels per day for the whole year.
Previously, both the American EIA and the International Energy Agency have repeatedly changed their estimates. In 2024, the EIA revised the data on global oil consumption in 2022, adjusted upward by 800,000 barrels per day. The adjustment was related to consumption in non-OECD (Organization for Economic Cooperation and Development) countries, which turned out to be higher than expected. The updated data influenced demand estimates in 2023 and forecasts for 2024 and 2025. In the last two cases, the changes are in the range of +400-500 thousand barrels per day.
The IEA also regularly revised its reviews so that the actual consumption data was higher than expected. In 2022, 260 thousand barrels per day were added, in 2023 — 330 thousand, in 2024 - 350 thousand. As a result, the growth in demand offset the previously predicted surplus, and the market in hindsight turned out to be closer to a deficit.
In other words, there is no accurate data on the size of stocks, supply and demand, although they form market sentiment and serve as a guideline for investments. OPEC said that an incorrect calculation of the dynamics of global supply and demand could lead to a misinterpretation of market trends. This significantly affects the mood of the players and has serious consequences for producers, consumers and the global economy as a whole.
What will happen to Russian companies and why investors should think about it
If a global shortage does occur, oil will once again become a strategic asset, and Russian oil companies will be considered undervalued carriers of barrels, rather than a problematic sector under sanctions. Currently, all three major issuers of the Russian oil sector are showing negative dynamics compared to the previous year — the price of their shares reflects distrust, political and regulatory risks. The industry is perceived as a risk asset - Russian securities remain undervalued, reflecting the old picture of the world, where there was supposed to be an excess of oil and the ability to easily replace any falling volumes.
If the market really goes into structural deficit mode and persistently high prices, a revision of investors' expectations may gradually lead to an increase in quotations of Russian oil companies, since the foundation of their business (cash flow, dividends, margins) will be supported by real commodity prices. Investors realize that companies that are already producing and selling oil are too cheap. The market will first change expectations, and then analysts will rewrite the reviews, so the key mistake is to wait for official confirmation from agencies. When it appears, prices will already be different — the market is moving faster than reports.
Analysts believe that periods when the news background is as negative as possible and everyone has already mentally accepted the disaster are actually the best entry points. In moments of total negativity, it is not the "stupid" capital that leaves the market, but the most cautious one — the asset remains in the hands of those who either have to hold it or are able to survive long periods without remuneration.
The theses contained in the text are not an investment recommendation, but the opinion of the editors.
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