Global crude oil prices are taking it easy.
Following the US administration's capture of Venezuelan President Nicolas Maduro over the weekend, crude oil prices were expected to gallop to $65 per barrel or thereabouts as soon as markets opened the next day. But that didn't happen. Instead, prices edged lower with markets maintaining a Zen-like calm, perhaps with belief running deep that oil reserves don't automatically translate to supply.
So when futures markets opened in Asia on Monday, US West Texas Intermediate (WTI), also known as US crude oil, inched to $57.69 at the start of the session, but fell the next minute to $57.01 per barrel. Similarly, Brent crude prices too fell 0.36% to $60.53 per barrel. However, hours later when the US markets opened, oil futures gained with US crude oil futures climbing over 2%, while Brent crude futures were 1.7% higher at $61.75 per barrel.
Broadly though, markets avoided disorderly behaviour and remained poised despite uncertainty surrounding oil prices and supply dynamics. This, despite concerns that we could see a repeat of 2025, when trade tariffs slowly morphed into a geopolitical nightmare.
While oil prices as such remained flat, US oil companies emerged as the immediate winners with stocks like Chevron, ConocoPhillips, and others rallying over 10% each. Some 10-odd companies rallied, adding an estimated $100 billion in market capitalisation, with Chevron alone accounting for $35 billion.
Interestingly, 2025 has been a tough year with both US crude oil and Brent crude seeing their largest annual drops since 2020. In all, crude prices plunged 20%, from over $70 per barrel to fall below $60. On a monthly average basis, the price of Brent crude oil declined from a high of $79 per barrel in January to a low of $63 billion in December, which was the lowest monthly average price since early 2021.
The annual average price was $69 per barrel, the lowest since 2020, even when adjusting for inflation. In the first half of 2025, prices declined in response to slowing economic activity, while the second half saw OPEC+ increasing crude oil production targets creating oversupply.
As oversupply, and weakening demand weighed on crude prices, OPEC+ vowed to refrain from pumping new oil in the first quarter of 2026.
The US attack on Venezuela, coming in this backdrop, casts a modest, if not an uncontrollable risk to oil prices in the short, medium and long term. What makes the timing is interesting is that it's an already oversupplied market, but given the steady OPEC+ policy, traders appeared content to await tangible physical developments rather than bet on a short-term supply shock or the long-term return of Venezuelan crude to markets.
Moving on, analysts are giving a bearish view on oil prices this year. The US Energy Information Administration (EIA) expects Brent oil to average $55 per barrel in Q1, 2026 and for the rest of the year. Similarly, Goldman Sachs too predicts Brent to decline to an average $56 per barrel if there's a peace deal with Russia and Ukraine.
It revised its WTI and Brent price estimates further to $51 and $58 a barrel, respectively, should Venezuelan crude production fall by 400,000 barrels a day by the end of 2026. And should production rise by 400,000 barrels a day instead, WTI and Brent crude prices are expected to average $50 a barrel and $54 a barrel, respectively in 2026.
Clearly, the primary reason fueling these downbeat forecasts is increased supply and the developments in Venezuela are negative for oil prices in the long-run, as any sustained increase in Venezuelan output would add to the existing supply glut amid slowing demand. But the short- and medium-term impact is likely to be varied.
According to internet scuttlebutt, Trump's attack on Venezuela is not just about oil, but all about China, which is Venezuela's primary customer. For instance, of the 1 mbd oil production, Venezuela exported about 900,000 barrels, mostly to China. Put another way, about 5% of China's annual crude oil imports are sourced from Venezuela.
It means, cutting off Venezuela is an attempt to deny China's access to cheap oil sources. That US is deploying energy as a leverage is further confirmed by Washington's escalating pressure on Iran, which also happens to be China's largest oil seller. Any supply disruption from Venezuela and Iran will hurt China, which is threatening to disrupt trade with export bans on silver, rare earth metals and semiconductor chips.
The other view is with regards to the accelerating US debt crisis. In 2025, US federal debt touched a record $38.5 trillion and at this pace, the total US is expected to cross past $40 trillion this year. Add to this, the massive debt Washington is expected to refinance in 2026 at a time when interest costs are remain higher than defence spending.
Importantly, there are fissures seen elsewhere in Japan and China, who are the largest foreign holders of US Treasuries. If the Japanese currency fluctuates, forcing its central bank to react by selling foreign bonds, it could cause a mini global market crash. Likewise, if Chinese yuan weakens strengthening the dollar, it could spike US yields, creating havoc.
Lastly, the move is to keep inflation and interest rates under check. After all, oil prices influence inflation, interest rates, and even the US Federal Reserve's monetary policy. High rates add billions to annual interest costs, while lower oil prices softens inflation, and slows down the debt spiral.
Meanwhile, India is likely to be insulated from direct energy impact, according to GTRI. Once a key buyer, India has drastically reduced Venezuelan oil imports due to US sanctions. Imports from Venezuela stood at $255.3 million, down from $1.4 billion in 2023-2024.
Venezuela holds over 303 billion barrels of proven oil reserves -- the largest globally -- accounting for roughly 17% of the world's total, even surpassing Saudi Arabia's reserves. However, years of crisis, US sanctions and decades of mismanagement, corruption and underinvestment has crippled its output, which fell from as high as 3.5 million barrels per day (mpd) in the 1970s to around 1 mpd, or 1% of global output. Taking production back to previous levels will need huge investments of roughly $10 billion or more annually.
