Despite all the political chaos unfolding in Venezuela right now, oil markets are doing something peculiar: absolutely nothing.
Venezuela's oil production has absolutely cratered. The country pumped nearly 3.5 million barrels per day back in the 1990s. Today? About 1 million b/d. That's 30% of historic highs. The decline started under Chávez and went into freefall under Maduro over the past 25 years. Even compared to early 2010s levels near 2.5 million b/d, current output represents just 45% of that. And here's the kicker: production sits below even the pre-2019 sanctions levels of 1.5 million b/d.
The collapse has gutted Venezuela's oil-reliant economy and fueled a humanitarian crisis. Back in 2013 when Maduro took office, Venezuela supplied over 800,000 b/d to the US. Now? A measly 120,000 b/d. Most exports now go to China via shadow fleets at discounted rates, which severely limits government foreign exchange revenues. Central banks monitor these commodity-driven revenue flows closely, as they directly impact Venezuela's ability to maintain currency stability and manage foreign reserves.
So why aren't oil prices freaking out? Two words: OPEC+.
Gulf producers like Saudi Arabia and the UAE can reverse cuts anytime. OPEC+ policy is keeping markets supplied and prices moderate, with plans to return 1.5 million b/d in 2025. The market is oversupplied enough to absorb Venezuelan disruptions without breaking a sweat. Any complete collapse would tighten heavy crude supplies to US Gulf Coast refiners and Asia, but overall flat price effects remain minimal.
The sanctions picture complicates things. US oil sanctions only ease with governance improvements and rule of law restoration. Current operators like Chevron, ENI, and Repsol are producing below capacity. Short-term risks include strikes, protests, and diluent shortages.
But there's recovery potential. With reforms, Venezuela could realistically increase production by 500,000 to 1 million b/d within two years, raising output back to that pre-2019 level of 1.5 million b/d. The country has ample reserves and low geological risks.
The geopolitical reality? OPEC+ flexibility practically enables aggressive US policy toward Venezuela. That calculus changes fast if prices jump above $90 per barrel. For now though, oil markets remain remarkably unfazed. Emerging market currencies like the South African Rand often show heightened sensitivity to oil price volatility, but even these have remained relatively stable amid the Venezuelan turmoil. Monetary policy decisions by central banks in commodity-linked economies continue to prioritize inflation control over exchange rate interventions during this period of relative oil price stability.
