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In a non-development that would have been inconceivable 20, 30 or 40 years ago, a military went into an OPEC country–a founding member, no less–captured its leader, took him away and oil markets yawned.
The biggest move in any key oil price since the U.S. capture of Venezuelan President Nicolas Maduro may have come Tuesday when the benchmark diesel price used for most fuel surcharges declined 2.3 cents/gallon to $3.477/g, the sixth week in a row the price has declined. It was posted Tuesday, effective Monday.
The latest decline brings the six-week total slide in the average weekly retail diesel price published by the Department of Energy/Energy Information Administration to 39.1 cts/g. However, the latest decline is the smallest recorded during the six weeks, with the highest price slide being 9.3 cts/g recorded on December 8.
Ultra low sulfur diesel on the CME has mostly arrested its decline that stretched back to a recent high settlement of $2.7011/g on November 18. Its low settlement since then was $2.107/g on December 26. It has bounced up and down in recent days, touched $2.1151/g on Friday, the first trading day of 2026 but more importantly the last trading day before the snatching of Maduro from Caracas.
It then rose Monday, the first trading day after the Maduro capture. But the overall market reaction to the Maduro capture was closer to a giant shrug. ULSD on CME had a less bullish reaction to the Venezuelan developments than global crude benchmark Brent, with ULSD up 1.31% to settle at $2.1428/g versus 1.66% for Brent which settled at $61.76/b.
At approximately 11:30 EST Tuesday, ULSD was down 1.54% to $210.97/g. If it were to settle there, the minor Monday upward bounce from the weekend’s activities will have been cancelled out.
The muted reaction to such a huge geopolitical development that would have sent markets soaring years ago was attributed to several factors.
First, every supply/demand model going into 2026 suggests a supply/demand imbalance with the former far oustripping the latter.
However, for a market said to be on the verge of glut, it hasn’t been acting like that. Brent’s settlement has been as low recently as $58.92/barrel on December 16, and even without Monday’s gain, it’s settled higher than that every day since.
Any sort of bearish reaction was muted by the fact that there is no change on the ground and Venezuela remains under the same sanctions and restrictions it did before Maduro’s capture. Those sanctions helped push Venezuela production in December down to about 963,600 b/d from 1.1 million b/d in November, according to S&P Global Energy. The November figure was among the highest it has been in several years.
To get that number higher is going to take a lot of money, work and time, according to S&P Global Energy.
In an email summary of current conditions in the Venezuelan oil industry, S&P Global CERA analyst Jim Burkhard (NYSE: SPGI) spelled out what it would take for a post-Maduro rebound in Venezuelan production to occur.
“Venezuelan production could grow if sanctions are removed, but it would require at least several billion dollars of fresh investment to boost marketed production to 1.5 million b/d in the next 12-24 months — an increase of roughly 500,000 b/d from recent levels (including blended diluent),” Burkhard said in the S&P Global Energy summary. “To expand output even more — to 3 million b/d, for example — would require much greater spending on infrastructure in addition to upstream development costs, and it would take many years. Investment terms — including confidence they will endure — and the oil price environment need to be conducive to such investments.”
Before Hugo Chavez took over Venezuela and PDVSA, the Venezuelan state oil company, began a long decline, Venezuelan output did top 3-million b/d regularly.
Amrita Sen, director of market intelligence at Energy Aspects, said in an interview on CNBC that her company’s analysis concluded that “just to increase production by half a million barrels per day would take at least two years and $10 billion.”
“Going back to the heyday of Venezuelan production, you’re talking about 100 billion dollars, if not higher, and anywhere up to seven to 10 years,” she said.
Oil company stocks did rise Monday. As Steve Richardson, head of energy research at Evercore said, that was an acknowledgement that there are opportunities.
Richardson said there may be some “quick hit opportunities” to increase Venezuelan production in the near term “if the environment is conducive.”
Richardson noted that Chevron has continued to operate in Venezuela for several years after other companies, following years of conflict with the Chavez/Maduro government, either chose to leave or were expelled.
For companies not there, he said, investing in the country is “obviously a much different calculus” than for Chevron,” Richardson said.
“These companies have shale businesses in the lower 48 that are relatively low risk,” Richardson said. “They have offshore opportunities. Next door in Guyana is a huge discovery and lots of opportunities. So for these companies it’s a question of return versus risk.”
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