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I expect little impact. The US was already in the top ten for crude reserves and top five for natural gas.
There’s a chance US private energy companies could override the Venezuelan caretaker government (per Trump’s dream) and pump Venezuelan energy into the market and push energy prices down. But in that scenario, OPEC would likely institute production controls to ensure the prices don’t drop too far. Venezuela is also part of OPEC, but we are clearly in uncharted territory with respect to US influence on the country. Also US companies need time to establish operations in Venezuelan oil fields - assuming any of this is going to play out.
KSA should double down on non-oil revenue credibility, because markets now assume more supply elasticity globally
Enthusiast
nothing venezuela’s oil is the costliest to extract. the infra needs hundreds of billions and years to be ready for opps by then dems would’ve pull a Biden-Afghanistan
Currently, Venezuela produces only about 1 million barrels per day due to years of neglect, but with this new investment, output will easily rise to few million per day.
This creates a serious challenge for OPEC, the organization of oil-producing countries that works together to limit total supply and keep global oil prices high enough to support their national budgets.
When a large amount of new oil enters the market from a source outside OPEC's control, it increases the overall supply, which naturally pushes prices lower.
Saudi Arabia, as the most powerful member of OPEC and the country with the ability to quickly adjust its production up or down, is hit hardest by this development.
in the past, most of the world's major oil supplies came from within OPEC, giving Saudi Arabia significant influence over global prices by deciding how much the group would produce.
Now, however, the US controls the planet's biggest oil reserves through Venezuela and operates outside OPEC rules.
Because the US does whatever it wants.
And we know what the Private Sector will focus on;
producing and selling as much oil as possible to maximize profits, without coordinating with the cartel.
This leaves Saudi Arabia with two difficult choices.
1. Cut its own production even further to make room for the new Venezuelan oil and try to prevent prices from falling too much. In other words, accept lower revenue in the short term to maintain some price stability.
2. Keep producing at current levels and allow the extra supply to flood the market, causing oil prices to drop significantly, which also means much less money coming in.
Either way, Saudi Arabia earns less, and its ability to set global oil prices is reduced because it can no longer control such a large portion of world supply.
To avoid direct conflict with the US, as it relies on for security and diplomatic support,
Saudi Arabia will likely handle this quietly. If they haven’t already.
They’re going to work through private talks to reach informal agreements on production levels, inviting US companies into joint projects, or accepting more TPS influence in exchange for more predictable markets.
At the same time though, I think the kingdom will push even more aggressively to build income sources beyond oil.
The US does not “control” Venezuelan oil, and even in a normalization scenario it wouldn’t behave like a unitary producer outside market logic.
1. Venezuela’s production rebound is slow and conditional.
Even optimistic scenarios add ~1.5–2.0 mbpd over many years, not “a few million” quickly
2. Normalization ≠ US directing oil flows.
What changes is sanctions status, not ownership. Venezuelan oil would be sold at market prices to whoever offers the best netback. China and India don’t automatically disappear as buyers, but discounts disappear.
3. The private sector does not maximize volume at any price
4. This is not a binary choice for Saudi Arabia.
Additional non-OPEC barrels raise the cost of defending price floors
5. China does not substitute dependence.
If Venezuelan discounts fade, China diversifies further and it might “hand volumes” to Saudi
Mentor
It likely will have one but it will take quite some time.