The ouster of Venezuelan President Nicolas Maduro is creating a multi-faceted outcome for energy markets, with U.S. refiners looking poised to benefit from cheaper, assured crude supply from a country now under their government’s oversight – even if the global oil glut grows.
The U.S. capture of Maduro and its intent to immediately take control of 30 million to 50 million bbl of Venezuelan oil could be a boon to refiners in the U.S. Gulf Coast, whose plants were specifically designed for the South American country’s Merey crude. Some U.S. companies with a foothold in the country have signaled interest in investing in crude production, but most oil majors remained hesitant.
In the 2000s, half of Venezuelan oil exports went to the United States After flows ebbed from 2015 onwards, refiners switched to more expensive grades of heavy, sour crude oil, sourcing alternatives from, among others, Mexico, Colombia, Saudi Arabia, and Canada.
However, aging oil fields in Colombia, Ecuador and Mexico and higher domestic consumption have translated into declining flows to the U.S. in recent years, with Canadian crude making up more than half of U.S. crude oil imports since 2019.
Mexican state refiner Pemex’s plans to produce more fuel domestically to reduce the country’s reliance on U.S. imports have the potential to further limit the supply of heavy sour crude oil. This is particularly the case if often delayed and problem-riddled refining projects like Dos Bocas get off the ground and conditions at six other old refineries that typically operate below capacity improve.
While new pipeline infrastructure allowed Gulf Coast refiners easier access to Canadian crude oil, West Coast refiners had to rely until recently on more expensive imports to supplement their Alaskan-crude-heavy diet.
Aside from Gulf Coast refiners, those in the Midwest would also indirectly benefit from revived flows of Merey crude, given the prospect of steeper discounts for Canadian crude which will be competing with the higher imports from Venezuela. BP, one of the main refined products suppliers in the Midwest, is expected to have a piece of the pie of the Venezuelan oil industry as well.
U.S. President Donald Trump has spoken of massive reinvestments into Venezuela’s decrepit infrastructure to revive oil production, to the tune of $100 billion, ahead of a meeting with executives from the U.S.’s largest oil companies. The prospect of faster growing crude oil production in an already saturated market has added to oversupply woes.
The bearish sentiment, however, has been limited by the reality on the ground in Venezuela. A revival of crude production will require years of work and billions of dollars in investment, along with political stability and security for oil workers.
So far, most oil majors have remained reluctant to signal interest in such an endeavor. Companies with already established operations like Chevron may jump on the opportunity. Given current political uncertainties and the likely decade needed for billion-dollar investments to pay off, many companies will be slow to enter this market. Exxon Mobil’s CEO recently called Venezuela “uninvestible,” pointing at political instability, security risks, and the massive initial investment needed.
Tapping into Venezuela’s vast crude oil reserves – at more than 300 billion bbl the largest in the world – won’t go without a hitch.
Venezuela, a founding member of the Organization of the Petroleum Exporting Countries (OPEC), in its heyday in the late 1990s produced 3.45 million bpd of mostly heavy, sulfur rich crude oil. Output was stable around 2.35 million bpd in the years preceding the U.S. shale boom.
But the oil price crash of the mid-2010s and consequent lack of revenues and reinvestment, along with mismanagement and the diversion of funds, led Venezuelan crude production to plummet below 1 million bpd by 2019.
Production has gradually increased since troughing at 280,000 bpd during the height of the pandemic-induced demand crash in mid-2020. In 2025, production averaged 935,000 bpd, according to OPEC estimates based on secondary sources – some 13% below claimed output, but still 8% higher than in 2024.
The end of the U.S. oil tanker embargo will likely mean a return of recently shut production. At the same time, a new, cheaper and closer source of diluents in the U.S. Gulf Coast, necessary to pipe sludgy Venezuelan crude oil, can provide another small boost.
Experts, however, remain skeptical about production returning anywhere close to pre-2015 levels in the next few years, given the desolate state of the country’s oil infrastructure.
In an ideal scenario – one requiring a certain level of political stability and security guarantees – companies with a foothold in Venezuela would expand operations and U.S. majors enter the market to replace run-down infrastructure and lost vital know-how. Under these conditions and combined with the return of production shut in by current sanctions, Venezuelan crude oil production could expand to 1.3 to 1.5 million bpd over the next three years. Currently, the lack of reinvestment and softening oil prices would likely translate into little to no growth.
A rapid increase in crude supply would pressure prices to a level low enough to stymie production in regions with higher break-evens, but overall still contribute to the global crude oil overhang, which the International Energy Agency forecasts to be around 3.8 million bpd in 2026.
The past year saw a growing divergence between crude oil and petroleum fuel prices. Even before OPEC in April decided to gradually return curtailed production, supply additions from outside the group were set to outpace demand growth.
Refining capacity in the United States and Europe is set to continue to shrink, and capacity additions elsewhere are far slower than expected crude oil supply growth. The return of Venezuelan crude oil is likely to add to this trend, which in the third quarter of 2025 led to the highest refining margins in years.
The new reality of the Venezuelan oil industry can be a boon for U.S. refiners, but producers will require more stability and higher prices in a market staring down the barrel of oversupply.
Karim Bastati is a senior energy analyst at DTN and has analyzed global oil markets since 2018. Prior to joining DTN, he worked as an oil analyst at Clipperdata, where he was responsible for producing the firm’s flagship Global Crude Report.
