Oil prices fall after Donald Trump’s Venezuela strikes

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Oil prices fell after the US operation to oust Venezuelan president Nicolas Maduro created uncertainty about the future of the world’s largest crude oil reserves.

Brent crude, the global oil benchmark, fell 0.5 percent on Monday to $60.44 a barrel, while West Texas Intermediate crude prices, the US oil benchmark, fell 0.6 percent to $56.97 a barrel.

Venezuela produces less than 1% of global oil production, with exports restricted by US sanctions and a naval blockade. But the country holds about 17 percent of the world’s proven crude oil reserves, according to the US Energy Information Administration, giving it the ability to significantly increase supply.

Traders must now evaluate the impact of US intervention on the oil market, at a time when analysts warn of an approaching crude oil glut.

The prevailing assumption is that US intervention will lead to lower prices as markets expect more Venezuelan barrels to eventually return, said Amrita Sen, founder of consultancy Energy Aspects.

“People will assume there will be a lot of oil in the medium term,” she said.

Traders are tired of “geopolitical risk considerations that don’t ultimately lead to real supply disruption,” said Sol Cavonic, an analyst at MST Financial.

Most analysts expect oil prices to continue to decline in the first part of this year, after a 20 percent decline in 2025 to Brent crude’s current level of just over $60 per barrel. “The market is as bearish as it has been for at least a decade,” Sen said, citing record short positions in Brent crude and historically low long positions in US West Texas Intermediate crude.

She added that while there may be more oil from Venezuela in the medium term, there is unlikely to be a significant increase in the short term. “Exports have already fallen by half and the blockade and sanctions are still in place, so you have a situation where nothing has changed, there is no additional oil.”

Despite the unrest in Venezuela, OPEC+ did not signal any immediate shift in strategy in an update scheduled for Sunday. Eight members of the producer group, including Saudi Arabia, Russia and the United Arab Emirates, met briefly and agreed to maintain their pause on increasing production until at least April.

In the short term, Venezuela’s oil production may decline further. The blockade has severely restricted imports of raw materials needed to blend the country’s heavy crude oil for export, leading to tighter operational restrictions. State-owned oil company Petroleos de Venezuela (PDVSA) has asked some joint venture partners to reduce production, Reuters reported on Sunday.

“We have identified at least 200,000 to 300,000 barrels per day that have already been shut down, and it could be more,” Sen said. “In the very short term, the risk is that we lose more production.”

Meanwhile, US stock market futures rose. S&P 500 futures rose 0.1 percent on Monday, while Nasdaq 100 futures rose 0.4 percent. Gold prices rose 2% to $4,418 per ounce. The dollar rose 0.3 percent against a basket of its counterparts.

“Short-term risk markets tend to vote on whether the worst-case scenario is becoming more or less likely,” said Edward El-Husseini, portfolio manager at Columbia Threadneedle. “In the case of Venezuela, we are looking to avoid a full-scale war and that may be enough to support the risks when it comes out this week.”