Market Insight | Week 36

Last week brought a series of developments aimed at strengthening of Venezuela’s oil sector. The US administration announced an agreement granting the US North American Blue Energy Partners (NABEP), up to 100-year concessions over 17 Venezuelan oil fields with estimated reserves of 65 bn barrels, equivalent to roughly 20% of the country’s total. Under the agreement, NABEP has given the US government a 35% stake and the right to purchase 20% of production from current and future fields.

Alongside this deal, foreign investment is also set to increase. Venezuela has signed agreements with international energy companies including Chevron and Eni, both of which have an established presence in the country. Chevron’s joint ventures plan to invest more than $7 bn over five years and more than double output to approximately 600,000 b/d. Eni has secured a 25-year contract as exclusive operator of the Junín 5 heavy oil field, containing reserves of 35 bn barrels.

The timing of additional output from these new investment commitments remains uncertain however, as years of underinvestment and mismanagement have degraded the country’s energy infrastructure. Existing operations offer scope for earlier gains through repairs, well reactivation and better utilisation of installed capacity, with a gradual increase in Venezuelan production expected to begin from next year.

For Washington, the rationale for the agreement is twofold: refinery compatibility and energy security. Venezuela’s predominantly heavy, sour crude is well suited to many US Gulf Coast refineries, while its geographic proximity to the United States reduces transport costs and delivery times. Disruptions to energy flows in the Middle East have also increased the appeal of a nearby oil source, particularly after releases aimed at stabilizing oil prices left US strategic petroleum reserves at a 40-year low. The initiative also reflects the administration’s commitment to fossil fuels and its broader ambition to strengthen US influence over energy flows across the Western Hemisphere. However, refilling the US Strategic Petroleum Reserve also presents technical constraints. Much of Venezuela’s crude is too heavy and too high in sulphur to meet the reserve’s specifications. US authorities are therefore considering exchanging Venezuelan heavy crude for lighter American oil. Refiners would receive Venezuelan barrels, while suitable US crude would enter storage.

Although the latest investment agreements have a longer-term horizon, Venezuelan crude exports have already risen since Nicolas Maduro’s removal in early 2026, altering trade patterns. Per LSEG data, shipments have nearly doubled to date 2026 period against 2025, with the US, India and Europe the main destinations. The US share increased from 31% to 51% and India’s from 4.5% to 22%. China’s share fell substantially from around 20% to 2%, while Europe’s remained broadly stable at approximately 9%. The recovery follows Maduro’s capture in January and US sanctions relief, which helped release stranded cargoes and ease restrictions on foreign operators.

Regional oil market dynamics are also shifting, as Venezuelan crude offers USA a nearby alternative to Western Canadian grades and Mexican Maya. Canada benefits however from pipeline connections to inland US refineries, providing a more resilient customer base than Mexico’s, while the Trans Mountain pipeline expansion has improved access from the Pacific coast to Asian buyers. Both countries have begun diversifying exports in 2026, increasing shipments to major Asian importers and supporting employment for crude carriers engaged in long-haul trades. Further growth in Venezuelan exports over the coming years is likely to redirect some Canadian and Mexican volumes from the US towards Pacific trade corridors, strengthening commercial ties with Asia.

Overall, the ramp up of Venezuelan output and exports are expected to strengthen short-haul trade to the US Gulf Coast and support mainly Aframax and Suezmax demand as the country’s production gradually recovers. A further rise of Canadian and Mexican shipments to Asia will also underpin long-haul employment for larger crude carriers. Together, these shifts contribute to a positive longer-term outlook for tanker markets, with gains building as foreign investment translates into higher output and exports. More broadly, the recovery of Venezuela’s oil sector should expand Atlantic Basin supply options, strengthen US energy security and reshape oil trade patterns over time.