Venezuela's changing situation is a "big problem" for OPEC, and the United States is expected to control "30% of the world's reserves."

Trump Administration Plans to Fully Control Venezuelan Oil Supply The Trump administration plans to fully control Venezuela’s oil supply. Combined with America's massive output, this move could reshape the global oil market landscape, playing a disruptive role in an already oversupplied market. According to a Wall Street Journal report on Monday, insiders believe that Trump, who has long advocated increased oil production and set a target price of $50 per barrel, is planning to push a comprehensive initiative to overhaul Venezuelan oil fields and market their output. This would give the U.S. control over the production of one of OPEC’s founding member states and could potentially have a disruptive impact on the global oil market. Analysts expect that, although reviving Venezuela’s debilitated oil industry will require massive investment and considerable time, even a small increase in production in the short term—and even larger increases over the long term—could exacerbate global supply-demand imbalances and further depress oil prices. According to estimates by JPMorgan analysts, the combined oil reserves of Guyana, Venezuela, and U.S. producers could allow the U.S. to control about 30% of global total reserves. OPEC members now face a difficult choice: Should they support prices by cutting supply, or risk hurting revenues and market share—and possibly damaging relationships with the unpredictable U.S. president? Prospects for Venezuela’s Capacity Recovery Cause Divisions Some OPEC members believe that if the Venezuelan government revises regulations to attract U.S. investors, the country could increase daily production by 2 million barrels within one to three years, from the current level of less than 1 million barrels, according to Gulf-region OPEC representatives. Insiders say that Saudi Arabia is currently taking a wait-and-see approach. Saudi judgment is that restoring Venezuela’s production will take years, and before U.S. companies invest the billions required to repair Venezuela’s battered infrastructure, they need a legal framework and U.S. government guarantees that could bind future Venezuelan governments. Although Venezuela holds vast oil reserves, its crude is heavy and high in sulfur, considered low quality and commercially unattractive. Other Gulf OPEC members believe that Trump’s plan may bring a ray of hope. Expansion of U.S. Influence Reshaping Market Power Balance Even so, U.S. involvement in Venezuela would complicate OPEC’s efforts at market management, since massive reserves would fall under U.S. control and outside OPEC’s orbit, representatives said. JPMorgan pointed out in a recent report: "This shift could give the U.S. greater influence over oil markets, potentially keeping prices at historically low levels, enhancing energy security, and reshaping the power balance within international energy markets." OPEC and its allies, including Russia, are already working on strategies to respond to Trump’s push for lower oil prices. Although Trump has repeatedly called on the group to increase oil production, member states fear prices are already too low. At Sunday’s meeting, OPEC, Russia, and other producers agreed to suspend any plans for production increases in the first three months of this year. Persistent Low Oil Prices Exert Pressure on All Sides Crude prices fell sharply last year due to increased global production and concerns over global economic conditions. The global oil benchmark Brent crude is now trading at around $63 per barrel, while U.S. benchmark crude hovers at around $59—both down roughly 20% compared to a year ago. Analysts have been lowering oil price forecasts in recent weeks. JPMorgan expects Brent crude to average $58 per barrel this year and U.S. benchmark crude to average $54. The bank anticipates even lower prices next year. This week, Saudi Arabia cut crude prices for Asian buyers for the third consecutive month. Regardless of how Venezuelan production changes, analysts agree that low oil prices will persist, putting pressure on global producers' profits and budgets. Continued dips below $50 per barrel—the breakeven threshold for many companies—could deal a heavy blow to the U.S. shale industry, which strongly supports Trump. Many U.S. drillers have already ignored the president’s calls for increased output and instead followed Wall Street’s demands for strict capital discipline. Analysts estimate that Saudi Arabia’s oil extraction cost is less than $10 per barrel. But, according to Capital Economics, the country needs prices above $100 to reduce its fiscal deficit to zero. Riyadh faces vast domestic spending commitments, resulting in an expanding budget deficit and increasing borrowing needs. The nation’s "Vision 2030" plan aims to diversify the economy by fostering growth in tourism, entertainment, and sports sectors. Risk Warning and Disclaimer There are risks in the market, and investment needs to be cautious. This article does not constitute personal investment advice and does not take into account the special investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investment decisions made accordingly are at your own risk.