Goldman Sachs comments on "Venezuelan upheaval": Short-term outlook uncertain, long-term may further intensify downward pressure on oil prices.

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The short-term outlook for crude oil supply after the sudden political upheaval in Venezuela is full of uncertainty, but Goldman Sachs analysis believes that in the long run, the potential recovery of the country's crude oil production will bring significant downward pressure to global oil prices.

Over the weekend, the United States took military action against Venezuela and detained the country's leader Maduro. According to Xinhua News Agency, US President Trump later stated that the US would be "deeply involved" in the future of Venezuela's oil industry. Trump claimed that American companies would invest billions of dollars to rebuild the country's collapsed energy infrastructure, intending to use US financial resources and industry technology to restore its former oil production glory.

According to Chase Trading Desk, Goldman Sachs analyst Daan Struyven warned in a report that considering the degree of infrastructure deterioration, any recovery in production will be "gradual and partial." However, if Venezuelan production rises in the long-term, combined with the growth of US and Russian output, it will further increase the risk of oil price downside from 2027 onward.

Despite heightened geopolitical tensions, Goldman Sachs has not adjusted its oil price forecasts for this year and still maintains average price expectations of $56 per barrel for Brent and $52 per barrel for WTI crude oil. Crude oil futures opened lower on Monday, with Brent crude trading around $61 a barrel.

Short-Term Supply Risks Remain

Goldman’s report believes that in the short term, Venezuela’s impact on oil prices is "ambiguous," depending on how US sanctions policy evolves.

On one hand, if the new government obtains comprehensive sanction exemptions with US support, and through importing diluents, repairing wells, and restarting damaged upgrading units, production could increase by 400,000 barrels/day by the end of 2026. In this scenario, Goldman expects Brent crude’s average price to drop to $54 a barrel in 2026, below its benchmark forecast of $56.

On the other hand, if the Maduro cabinet attempts to retain control leading to increased turmoil, or production interruptions continue due to storage limits, output could fall by 400,000 barrels/day in the same period, pushing Brent’s average price up to $58 per barrel. Currently, the benchmark scenario assumes production stays at 900,000 barrels/day.

Last November, Venezuela’s output was about 930,000 barrels/day, but due to recent US interceptions of oil tankers causing local oil tanks to overflow, recent output may have slipped further to around 800,000 barrels/day.

Long-Term Recovery Puts Pressure on Oil Prices

Looking ahead long-term, Goldman points out Venezuela owns about one-fifth of the world’s proven oil reserves and reached a production peak of about 3 million barrels/day in the mid-2000s. If the country’s output can recover to 2 million barrels/day by 2030 (above Goldman’s benchmark assumption of 900,000 barrels/day), it is expected to bring a $4 per barrel downside to 2030 oil prices (benchmark forecast is $80).

The analyst team emphasized this potential increase, together with recent outperformance in US and Russian output, further intensifies downside risk for long-term oil price forecasts. Additionally, the gradual recovery of Venezuela’s heavy crude output, because it is rich in diesel fractions, may partially offset the structurally positive outlook for diesel profit margins.

Despite Trump’s grand reconstruction vision, Goldman Sachs remains cautious about the speed of recovery. The report notes Venezuela’s infrastructure is severely degraded, and boosting recovery of heavy oil will need massive investment and time in crude upgrading units.

Moreover, improvements in operating efficiency, stable power supply, and better oil transportation infrastructure are also essential conditions. Analysts point out that any substantial recovery will require strong incentives to attract massive upstream investment, meaning the increase in production is destined to be a slow and partial process.

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