Regime change in Venezuela could bring boost in oil production - but not as much as you'd think

By Myra P. Saefong It would take time and billions of dollars to fix Venezuela's oil infrastructure U.S. Treasury Secretary Scott Bessent announced new sanctions on Venezuela this week. Regime change in Venezuela would likely lead to improvements in the nation's oil-production infrastructure that could help unleash more supplies and keep a lid on prices for the global economy. Yet it would it take time and billions of dollars to fix - and the output boost may not be as impressive as some would expect. Global oil supplies have been climbing, leading to forecasts for a big supply glut next year. Many on Wall Street lately, however, have become more optimistic about growth for the global economy next year, which would lift prospects for oil demand. A change in Venezuela's socialist regime, helmed since 2013 by autocratic President Nicolás Maduro, would have a "considerable impact on supply and demand in the next decade" - but not this year, and likely not in 2026 or 2027, said Tom Kloza, chief oil analyst at Gulf Oil. Wood Mackenzie, a global research and consulting firm, estimates that improvements and investments in Venezuela's infrastructure could lift its oil output to roughly 2 million barrels a day - in one or two years. It may then take another decade, and billions of dollars in investment, to lift output by another 500,000 daily barrels. To put the potential increase in perspective, daily global oil production was nearly 102 million barrels in 2023, according to the U.S. Energy Information Administration. The White House has threatened to force Maduro's resignation, partly due to U.S. accusations of drug trafficking. Oil-market experts, however, have speculated that access to oil from Venezuela, which holds the world's largest crude-oil reserves, is a key reason, too. Read: What oil traders say matters most if the U.S. pushes for regime change in Venezuela Earlier this week, President Donald Trump announced that the U.S. had seized a large oil tanker off the coast of Venezuela. That marked a significant escalation of tensions between Washington and Caracas, in the wake of U.S. strikes on boats in the Caribbean Sea that the Trump administration has insisted were embarked on drug runs. The U.S. is preparing to intercept more ships transporting Venezuelan oil, Reuters reported, citing sources described as familiar with the matter. The White House hasn't responded to a request for comment on the Reuters report. When asked Friday for comment on the seizure of the oil tanker, an official referred to White House press secretary Karoline Leavitt's briefing a day before. At that press conference, she was asked whether Trump would use the seized oil to help Americans with affordability. In her response, Leavitt said the vessel is "currently undergoing a forfeiture process." The U.S. intends to seize the oil from the vessel and will follow a legal process to do so, Leavitt said. Recalling the Gulf War The last time the U.S. threatened another oil-producing state of this significance with hostilities was probably during the second Gulf War, when the U.S. invaded Iraq in 2003, said Michael Lynch, president of Strategic Energy & Economic Research. That took about 2 million barrels a day of Iraqi crude-oil production offline, he said. At roughly the same time, then-Venezuelan President Hugo Chávez, in 2002 and 2003, fired executives of the state-owned oil and natural-gas company Petróleos de Venezuela. The combined events led to the bull market that culminated in a brief crude-oil peak in 2008 at $140 a barrel, said Lynch. Trump has cited illegal drug smuggling by Venezuela in its public explanations of the boat strikes that began in September. He told reporters that the U.S. seized the oil tanker for "for a very good reason" but didn't offer additional details. U.S. Attorney General Pamela Bondi wrote on X that the tanker was used to transport sanctioned oil from Venezuela and Iran. Venezuelan oil exports through so-called dark vessels - which are loaded without the use of an automatic identification system, leaving their origins in question - have shown a sizable rise from 2024, according to data from Kpler. Venezuelan crude exports, in thousands of barrels a day, have climbed this year on the back of a rise in "dark" vessels. This week, Treasury Secretary Scott Bessent outlined new sanctions, which name some of Maduro's relatives and certain ships carrying Venezuelan oil. Infrastructure recovery As tensions between the U.S. and Venezuela rise, the oil market has watched with interest, even as prices have exhibited little reaction. Oil traders have mostly "ignored the Venezuelan seizures, as I believe they should," said Gulf Oil's Kloza. Oil prices ended lower for the week, with U.S. benchmark West Texas Intermediate crude for January delivery (CL.1) (CLF26) settling at $57.44 a barrel Friday, for a weekly loss of 4.4%. Global benchmark Brent crude saw its February contract (BRN00) (BRNG26) finish at $61.12 a barrel, down 4.1% for the week. Venezuela's oil production is "already at rock bottom, so seizures and tensions hardly move the needle," said Manish Raj, managing director at Velandera Energy Partners. In October 2025, Venezuela's crude-oil production was at 956,000 daily barrels, according to data cited by CEIC, which provides data insights into developed and developing markets. Operational improvements and investment in Venezuela's Orinoco Belt heavy-oil region could raise the nation's production back to the levels of the mid-2010s at around 2 million barrels a day, within one or two years, Ed Crooks, vice chair for the Americas of Wood Mackenzie and host of the "Energy Gang" podcast, said on Dec. 5. Venezuela's oil production peaked in the early 1970s at more than 3.5 million barrels a day, then declined through the 1980s and early 1990s before again eclipsing 3 million barrels a day in the late 1990s, according to a 2021 report from the Center For Strategic & International Studies. "Most of the upgrades needed to process the region's oil went offline between 2019 and 2021, and the ones that remain in service need consistent expenditure to keep running," said Crooks. Orinoco Belt joint ventures between Venezuela's national oil company and international oil companies would need $15 billion to $20 billion of investment over the next 10 years just to add another 500,000 barrels a day in oil production, Crooks said, citing Wood Mackenzie estimates. Using Iraq as an example, the Wood Mackenzie team argued that "regime change and ending sanctions can lead to material changes in oil output," said Crooks. In 2002, shortly before the U.S.-led invasion, Iraq's production was about 2 million barrels a day, and by 2019 it was more than double that, at about 4.7 million barrels a day, according to Wood Mackenzie estimates. "But that growth came at a time of steadily increasing global oil demand, primarily driven by China, and a generally supportive price environment," said Crooks. That's not the case today. 2025 has been a year of "downward pressure on oil prices, created by expectations of slowing demand growth and increased OPEC+ production," Crooks said. Robert Schroeder contributed. -Myra P. Saefong This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal. (END) Dow Jones Newswires 12-13-25 0800ET