Why is it still difficult for Venezuelan oil production to recover quickly after Trump took action?
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The latest research reports from HSBC and Goldman Sachs reveal a harsh reality: the recovery of Venezuela’s oil industry will be extremely slow, expensive, and partial.
According to Xinhua News Agency, the White House has already requested that major U.S. oil companies invest heavily in Venezuela to repair its crude oil extraction infrastructure.
Despite Trump’s promise of large-scale investment and the country’s nominally largest reserves in the world, most of these “on-paper oil” reserves do not have commercial extraction value, and the market should not expect any “V-shaped” rebound.
According to Wind Trading Desk, on January 5, HSBC and Goldman Sachs analysis pointed out that in the short term, due to sanctions and turmoil, oil production may even face further downside risks. For investors, Venezuela’s changing situation will not trigger a surge in oil prices in the short run, because the global market is already severely oversupplied; in the long run, if tens of billions of dollars of funding actually arrive, the potential production return will become a major bearish factor suppressing oil prices after 2027.
Due to sanctions and storage limits, short-term output faces “well shutdown” risks
Though the market is discussing recovery, HSBC points out that the actual trend of Venezuela’s oil industry is currently contraction rather than expansion. After the Maduro regime’s ouster on January 3, 2026, the U.S. did not immediately lift sanctions on Venezuela; shipping bans on tankers remain effective. This policy has made it difficult for Venezuela to both export crude oil and import naphtha needed to dilute its heavy oil.
Data already show worsening signs: In December 2025, Venezuela’s crude oil exports dropped to 500,000 barrels per day. Due to blocked exports and domestic storage tanks being full, PDVSA (Venezuela’s state oil company) has been forced to ask joint ventures to curtail production, with at least 200,000 to 300,000 barrels per day of capacity shuttered.
Goldman Sachs’s analysis further confirms this, noting that recent output may have dropped to around 800,000 barrels per day due to storage issues. Even in an optimistic scenario where the new government gains full sanction exemptions, Goldman expects production to rise by only 400,000 barrels per day by the end of 2026; in a more chaotic and pessimistic scenario, output could fall a further 400,000 barrels per day.
“Paper riches” and real-world difficulties: Infrastructure rebuilding requires $100 billion
Media often cite Venezuela’s “world’s largest oil reserves (300 billion barrels),” but HSBC emphasizes this is highly misleading on a commercial level.
The vast majority of Venezuela’s reserves are in the Orinoco heavy oil belt, which is high-cost extra-heavy oil. According to Rystad Energy, only 3 billion barrels of the country’s proven reserves are commercially viable, and its technically recoverable resources (55 billion barrels) are far below the U.S., Saudi Arabia, or Russia.
Even more severe is the complete collapse of physical infrastructure. After years of asset depletion, equipment dismantling, and neglected maintenance, the infrastructure is in ruins: pipelines are badly corroded, and upgrading equipment is in disrepair. Industry estimates say restoring output to the 1970s’ peaks would require about $10 billion per year for the next decade, with total costs exceeding $100 billion. Even to return output to 1.5–2 million barrels per day will require thousands of kilometers of pipelines and power facilities to be repaired, and HSBC estimates this will take at least ten years.
The return of western oil giants: lackluster interest and legal mire
Trump is counting on U.S. oil giants leveraging technology and capital to lead reconstruction, but this faces huge commercial barriers.
HSBC points out that apart from Chevron, which still holds a special permit to operate in the country, ExxonMobil and ConocoPhillips and other giants withdrew as early as 2007 when their assets were expropriated.
Currently, Venezuela still owes foreign oil companies about $20 to $30 billion. Until legal disputes are settled, fiscal terms are improved, and the political situation stabilizes, Western oil companies will remain extremely cautious.
The CEO of ExxonMobil has clearly stated that investment depends on economic viability. Given the high extraction costs of Venezuelan heavy oil and global oil price pressures, private capital lacks motivation for a large-scale return to the country.
Given global oversupply, Venezuela’s impact is limited
No matter how things develop in Venezuela, its short-term impact on global oil prices will be diluted by market structure. HSBC forecasts that the world oil market will face severe oversupply in 2026, with the glut peaking in the first quarter and averaging about 2.1 million barrels per day in excess for the year.
Against this backdrop, even a complete halt in Venezuela’s current 500,000–600,000 barrels per day of exports would not cause a lasting spike in prices.
Goldman maintains its forecast for Brent crude to average $56/barrel in 2026. In the long run, only if Venezuela’s output unexpectedly rebounds above 2 million barrels per day by 2030, could this, combined with increases from the U.S. and Russia, bring an extra $4/barrel downside risk to oil prices. But given the aforementioned infrastructure and funding barriers, the probability of this long-term risk being realized remains questionable.
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The above content comes from Wind Trading Desk.
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