One of the most important questions concerning investors after the arrest of Venezuelan President Nicolas Maduro is how this event will affect the prices of strategic products. This is directly related to Venezuela being an oil producer with rich reserves.
So, how will Maduro's arrest affect oil prices?
According to Modern.az, Vugar Bayramov, an economist deputy of the Milli Majlis, spoke about the effects of Nicolas Maduro's arrest on oil prices.
According to him, forecasts are presented here based on several scenarios:
“Although international organizations present different indicators regarding Venezuela's daily oil production, it becomes clear from all figures that the aforementioned state does not hold a special position in the market. According to the U.S. Energy Information Administration (EIA), with a daily production of 1.098 million barrels, Venezuela ranks 18th among oil-producing countries. The EIA states that 72 percent of total oil production belongs to 10 countries. “Trading Economics” shares a similar, though not identical, result: 17th place on the list with 1.142 million daily production.
The other side of the issue is that Venezuela is not among the top 20 oil-exporting countries. Thus, by exporting 438 thousand barrels of oil to the world market, this country ranks 22nd among exporting countries. The low oil exports are, of course, related to the sanctions imposed on Venezuela. In 2024, 15.2 percent of oil exports in value terms belonged to Saudi Arabia. The top “five” are completed by Russia (9.7%), the USA (9.4%), the United Arab Emirates (9.1%), and Canada (8.5%).
However, a more important point for investors than all of this is that Venezuela ranks first in the world for oil reserves. 18.2 percent of discovered oil reserves belong to Venezuela. The “four” are completed by Saudi Arabia (16.2 percent), Canada (10.4 percent), and Iran (9.6 percent). This means that the exploitation of Venezuela's oil reserves by the USA will lead to a large volume of oil entering the market and a sharp increase in supply in the near future. This does not promise anything favorable for market prices. For comparison, it should be noted that Iraq, which sharply increased production after the entry of US investment into its oil sector, currently accounts for 8 percent of total oil exports in value terms.
Nevertheless, it is not excluded that the realization of a sharp supply scenario will take time. Because the technological reconstruction of Venezuela's oil infrastructure requires not only funds but also time. This, in turn, means additional time for the large volume of oil that will enter the market from Venezuela.
Another scenario is the risk of potential chaos in Venezuela. In this case, the oil market will react differently to the processes. However, even in this case, a sharp increase in oil prices is not expected. Because Venezuela's current production and exports do not significantly affect the market. Even if those exports decrease, it does not create a basis for price increases.
All of this suggests that even if not in the short term, noticeable reductions in oil prices will be inevitable in the medium term. This further increases the priority of replacing oil revenues with other sources as a result of economic diversification”.
