JPMorgan's latest Oil Markets - The weekly report highlights Venezuela's potential political transition as one of the largest upside risks to global oil supply in 2026 and beyond, an outcome not yet priced into current markets. The analysis suggests that a stable regime change following the recent capture of former President Nicolás Maduro could transform Venezuela into a major new source of oil supply over the next decade. Currently producing 750,000-800,000 barrels per day (bpd), output could rise to 1.3-1.4 million bpd within two years and potentially reach 2.5 million bpd long-term with sustained investment, drawing on the country's vast reserves of over 300 billion barrels—the world's largest proven reserves.
The report warns of short-term disruptions during transition, where production might drop by up to 50% due to labor issues, operational halts, or uncertainty at state oil firm PDVSA, based on historical precedents. JPMorgan forecasts Brent crude averaging in the low $60s per barrel in 2026, driven by rising non-OPEC supply, including potential Venezuelan barrels, alongside output from Brazil, Guyana, and the US. Analysts note markets underestimate this growth, as reflected in the oil futures curve, amid ample global supply exceeding demand by up to 2 million bpd per the International Energy Agency.
US oil majors like Chevron, ExxonMobil, and ConocoPhillips could re-enter if sanctions ease and contracts reset, alongside European firms Repsol and Eni, and players from India and Latin America resolving payment disputes. President Trump has announced interim authorities will transfer 30-50 million barrels of sanctioned oil to the US at market prices, with proceeds controlled to benefit Venezuelans and Americans. This aligns with efforts to revitalize aging infrastructure, previously hampered by underinvestment and sanctions.
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A Venezuelan recovery could shift Western Hemisphere dominance, with US-influenced reserves (including Guyana) nearing 30% of global totals, altering energy geopolitics. However, challenges persist: security risks, dilapidated facilities, and political instability could delay billions in required investments. JPMorgan's bearish outlook persists, viewing the transition as high-risk, high-reward amid current crude prices below $70 per barrel.
The report underscores broader market dynamics, with OPEC+ pausing production changes through Q1 2026. While immediate impacts are muted due to oversupply, long-term Venezuelan supply growth supports lower prices, benefiting consumers but pressuring producers. Analysts like those at Goldman Sachs and RBC Capital echo modest short-term rises but emphasize stability for sustained revival.
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