Analysis of the Impact of Venezuela's Oil Supply Recovery After Sanctions Relief on the Global Energy Market

Based on the collected information, I will prepare a systematic and comprehensive analysis report for you.

According to the latest reports, commodity trading giant Vitol will ship the first batch of naphtha cargo from the U.S. Gulf Coast to Venezuela this weekend (January 11-12, 2026)[1]. This naphtha will be used as a diluent to reduce the viscosity of Venezuelan crude oil, making it easier to transport and process. This move marks a major adjustment to the U.S. oil sanctions policy on Venezuela.

The Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury has issued licenses for purchasing Venezuelan crude oil to major global traders including Vitol and Trafigura[2]. Notably, the license terms explicitly require that initial shipments must be sold to U.S. buyers, reflecting the U.S. government’s strategic intention to control the flow of Venezuelan oil.

Venezuela has the world’s largest proven oil reserves, approximately 303 billion barrels, accounting for 17% of global total reserves, exceeding Saudi Arabia (267.2 billion barrels) and Iran (208.6 billion barrels)[3]. However, due to long-term mismanagement, severe underinvestment, and multiple blows from international sanctions, the country’s oil industry has declined sharply:

• Current Production
  : In 2025, the average daily production was approximately 830,000-1.1 million barrels, accounting for only 1% of global supply
• Historical Peak
  : In the 1970s, daily production reached 3.5 million barrels, accounting for over 7% of global production
• Capacity Contraction
  : Compared to the 3.2 million barrels per day when Hugo Chávez took office in 1999, capacity has shrunk by more than 70%

Although geopolitical events usually trigger sharp fluctuations in oil prices, the immediate impact of the changes in Venezuela’s situation on oil prices is relatively limited. Analysts generally believe that this is mainly due to the following reasons[4]:

1. Small Production Scale
   : Venezuela’s current production is a drop in the bucket compared to the global average daily consumption of 100 million barrels
2. Expectation of Oversupply
   : The global crude oil market is expected to face structural oversupply in 2026
3. Risk Already Priced In
   : The previous geopolitical risk premium has been partially factored into oil prices

Goldman Sachs forecasts that the average price of Brent crude will be $56 per barrel and WTI crude will be $52 per barrel in 2026, mainly affected by a large-scale oversupply of approximately 2 million barrels per day in the market due to surging production[5].

Refineries along the U.S. Gulf Coast will be one of the biggest winners of sanctions relief. These refineries have a unique capacity to process Venezuela’s heavy crude oil[6]:

• Nearly 70% of U.S. refining capacity is designed primarily to process heavy crude oil common in Venezuela, Canada, and Mexico
• Valero Energy Corporation’s (Valero) stock price surged 9% after the news was announced, Phillips 66 rose 7%, and Marathon Petroleum rose 6%
• U.S. refiners currently import only about 100,000-200,000 barrels of Venezuelan crude oil per day, far lower than the 1.4 million barrels per day in 1997

S&P Global Energy estimates that from 1990 to 2010, U.S. refineries invested approximately $100 billion in heavy crude oil processing capacity. The potential sharp rebound in Venezuelan heavy oil imports means that these refineries’ previous large-scale investments are expected to pay off[6].

Analysts have forecast different scenarios for Venezuela’s oil production recovery[7]:

JPMorgan analysts believe that under a political transition scenario, Venezuela may increase its production to 1.3-1.4 million barrels per day within two years, and may reach 2.5 million barrels per day in the next decade[8].

However, achieving this goal requires huge investment. Wood Mackenzie estimates that an investment of $15-20 billion is needed to increase daily production by 500,000 barrels. Venezuela’s oil facilities are severely aging, its economic situation is poor, and it lacks sufficient funds. Restoring capacity to historical peaks will require approximately $58 billion in investment[9].

The potential recovery of Venezuela’s oil production capacity will exert downward pressure on oil prices in the medium to long term[4]:

• Worsening Oversupply in 2026
  : The International Energy Agency (IEA) predicts that the global average daily crude oil surplus may approach 4 million barrels in 2026, and may even hit a historical peak of 5 million barrels in the first half of the year, equivalent to 4% of global average daily supply
• Downward Shift in Oil Price Center
  : The Economic and Research Institute of Sinopec predicts that the average price of Brent crude will continue to decline within the range of $60-65 per barrel in 2026
• Long-Term Bottom Support
  : UBS predicts that Brent crude will reach $67 per barrel by the end of the year and is expected to rebound to $70 per barrel in 2027, with the main supporting factors coming from supply contraction by low-cost shale oil companies and sustained growth in petrochemical demand

The lifting of sanctions on Venezuela will reshape the global trade flows of heavy crude oil[7]:

• Refineries along the U.S. Gulf Coast will be the main absorbers
• Former major buyers such as India and Spain may return to the market, with potential procurement volumes of approximately 100,000-150,000 barrels per day
• After U.S. domestic refineries obtain more heavy crude oil, they can free up more light crude oil for export

• China’s local private small and medium-sized refineries increased their imports of Venezuelan crude oil to approximately 400,000 barrels per day in 2025, and now face the risk of supply reduction
• Cuba imported 1,100 barrels of Venezuelan oil per day in 2025, and its import channels face a sharp reduction

China is one of the major buyers of Venezuelan crude oil. From January to November 2025, China imported approximately $199 million worth of crude oil from Venezuela[10]. In response to changes in sanctions, Chinese refining companies have begun to adjust their layouts:

• Shift to Canada
  : Multiple traders report that China’s inquiries for Canadian crude oil have increased significantly. Canadian heavy oil is similar in nature to Venezuelan crude oil and is the closest alternative source
• Transportation Advantage
  : Crude oil shipped from Vancouver, Canada takes only 17 days to reach Qingdao, China, which is much shorter than the 57-day voyage from Venezuela
• Price Spread Consideration
  : Canadian crude oil is currently about $8-9 more expensive per barrel, which may dampen the procurement willingness of some refineries

Approximately 64% of the crude oil transported via Canada’s Trans Mountain Pipeline flows to China, and most of the rest is shipped to the U.S. West Coast[10].

Large global traders play a key role in Venezuela’s oil trade[2]:

• Vitol
  : The first to obtain a license to resume purchases, will load the first shipment this weekend
• Trafigura
  : Confirmed that it will load its first tanker next week, and is coordinating with the Trump administration to ship oil to the U.S.
• Mercuria
  : Is considering its Venezuela options, including applying for a license
• Gunvor
  : Has not yet commented on this

Saad Rahim, Chief Economist of Trafigura, stated that production levels are unlikely to change in the foreseeable future, but oil has been accumulating in storage under sanctions. “If everything is legal and compliant, we can transport it out”[2].

This sanctions relief reflects the U.S. strategic intentions towards Venezuela’s energy resources[4]:

1. Control Global Oil Production
   : By controlling Venezuelan oil, the U.S. can send a message to the world that it has control over a large portion of global oil production
2. Stabilize Domestic Refinery Supply
   : Refineries along the U.S. Gulf Coast have long faced a structural shortage of heavy crude oil
3. Restrict Adversaries’ Energy Access
   : Cut off energy supply channels for countries such as China

U.S. Secretary of State Marco Rubio stated, “When it comes to refining heavy crude oil, the refineries along the U.S. Gulf Coast are the best. If private enterprises are given space, they will have huge demand and interest in this field”[6].

The Venezuela incident is a microcosm of the evolution of global energy supply chains towards “camp division”[9]:

• Supply Chain Restructuring
  : Global supply chains based on economic efficiency are accelerating their evolution to supply chains based on geopolitical alliances
• America-First Policy
  : Sanction waiver terms require that most supplies must be sold in the U.S.
• China’s Diversified Layout
  : China is ensuring energy security through multiple channels such as Canada, West Africa, and Brazil

As the world’s largest crude oil importer, China’s oil dependence on foreign countries has long remained at a high level of over 70%. In the face of the complex situation, China is adopting a multi-pronged response strategy[10]:

• Diversification of Import Sources
  : Russia, Saudi Arabia, Iraq, Malaysia, and Brazil are China’s top five crude oil import sources, accounting for more than 51% in total
• Domestic Production Guarantee
  : The national strategy requires “stabilizing annual crude oil production at 200 million tons”
• Advancement of Energy Transition
  : With the rapid replacement of new energy vehicles, China’s oil dependence on foreign countries has entered a peak plateau period

The situation in Venezuela remains highly uncertain:

• Risk of Internal Turmoil
  : There is a possibility of triggering internal turmoil or even civil war
• Policy Continuity
  : The policy direction of the interim government is uncertain
• Investment Environment
  : U.S. enterprises are cautious about investing billions of dollars in a low oil price environment

Venezuela’s oil industry faces serious facility aging problems:

• Oilfield Facilities
  : Long-term underinvestment has led to severe equipment aging
• Port Facilities
  : Large-scale repairs are needed to improve export capacity
• Refining Capacity
  : Domestic refineries have ceased operations, requiring gasoline imports

Major institutions have obvious divergences in their 2026 oil price forecasts[5]:

1. Limited Short-Term Impact but Clear Signal
   : The shipment of Vitol’s first batch of cargo marks a substantial loosening of U.S. oil sanctions on Venezuela, but due to the small production scale, the direct impact on the global total crude oil supply and demand is limited

2. Regional Interest Redistribution
   : Refineries along the U.S. Gulf Coast will be the biggest winners, while traditional buyers such as China will face supply restructuring

3. Increased Medium-to-Long-Term Supply Pressure
   : If Venezuela’s production capacity gradually recovers and attracts foreign investment, it will exacerbate oversupply in the global crude oil market in the medium to long term, exerting sustained downward pressure on oil prices

4. Profound Reshaping of Trading Pattern
   : Global heavy crude oil trade flows are undergoing a shift from “globalization” to “camp division”, and the security attribute of energy supply chains is increasingly prominent

Looking ahead, the pace of recovery in Venezuela’s oil market will depend on the following key factors:

• U.S. Policy Direction
  : Whether the scope and conditions of sanction waivers will be further relaxed
• Investment Willingness
  : Whether U.S. oil companies are willing to invest huge sums of money in capacity recovery
• Infrastructure Repair Progress
  : The cycle of repairing existing oilfields and developing new production capacity
• Changes in Global Demand
  : The economic recovery and energy transition progress of major consumer countries such as China

In any case, as the holder of the world’s largest oil reserves, any change in Venezuela’s energy policy will have a profound impact on the global energy landscape.

[1] Sina Finance - “Insiders: Vitol Group to Ship First Batch of Diluent Cargo Under Venezuela Supply Agreement Framework This Weekend” (https://finance.sina.com.cn/world/2026-01-11/doc-inhfwisf8384530.shtml)

[2] Argus Media - “US begins issuing Venezuela sanctions waivers: Update” (https://www.argusmedia.com/news-and-insights/latest-market-news/2773510-us-begins-issuing-venezuela-sanctions-waivers-update)

[3] Yahoo Finance - “U.S. Lays Out Venezuela Oil Export Plan; Chevron, Vitol and Trafigura Compete” (https://tw.stock.yahoo.com/news/美布局委內瑞拉石油出口雪佛龍-vitol與trafigura同場角逐-231005568.html)

[4] Wood Mackenzie - “Venezuela Regime Change: Impact on Oil & Crude Markets” (https://www.woodmac.com/news/opinion/venezuela-regime-change-what-it-means-for-oil-production-crude-and-product-markets/)

[5] Wall Street CN - “Goldman Sachs Commodity Outlook: Oversupply Drives Oil and Gas Prices, Oil Prices Expected to Bottom in Mid-2026” (https://wallstreetcn.com/articles/3761709)

[6] Yicai Global - “Connecting with Venezuelan Heavy Crude Oil: Will the Future of U.S. Gulf Coast Refineries Be Transformed?” (https://www.yicai.com/news/102989484.html)

[7] Securities Times - “What Impacts Will Trump’s "Takeover" of Venezuela Bring to the Global Energy Market?” (https://www.stcn.com/article/detail/3570344.html)

[8] Reuters - “Small rise in Venezuelan oil supply possible over next two years: Goldman Sachs” (https://www.reuters.com/business/energy/us-sanctions-policy-determine-venezuelas-oil-production-outlook-goldman-says-2026-01-04/)

[9] People’s Daily - “U.S. "Blitz" on Venezuela; Global Energy Landscape May "Change"” (http://paper.people.com.cn/zgnyb/pc/content/202601/05/content_30130668.html)

[10] Guancha.cn - “After U.S. Seizure, "Chinese Enterprises Have Shifted to Canada"” (https://www.guancha.cn/internation/2026_01_09_803285.shtml)

[11] CN Futures Online - “Venezuelan Oil Game and 2026 Crude Oil Market Pattern” (http://futures.cnfol.com/qishidongtai/20260110/31931293.shtml)

[12] Jiemian News - “Global Crude Oil Prices Will Be Below $65 in 2026” (https://m.jiemian.com/article/13825486.html)