Global oil markets have been rocked after former US President Donald Trump announced a deal to take control of up to 50 million barrels of Venezuelan crude, sending prices sharply lower and escalating international tensions.
Market Reaction to the Proposed Oil Transfer
The announcement, made by Trump on his Truth Social platform, triggered an immediate sell-off in the global oil market. The international benchmark, Brent crude, fell to just over $60 a barrel, while the US oil price dropped by 1.4% to $56.44 a barrel. This decline compounds a difficult period for the sector, which last year saw its steepest annual fall since the Covid pandemic.
The proposed agreement would grant the US president authority to sell up to $3bn (£2.2bn) worth of Venezuelan oil currently stranded in tankers and storage facilities. This influx of crude threatens to further depress prices in a market already oversupplied, as producers worldwide continue to pump more oil than the global economy requires.
Geopolitical Fallout and Industry Scepticism
The move has drawn a fierce response from China, which currently receives about 80% of Venezuela's crude exports. Beijing's foreign ministry stated that the US demands "violate international law, infringe upon Venezuela’s sovereignty, and harm the rights of the Venezuelan people." The deal raises the prospect of disrupting Venezuela's oil flow to China, potentially forcing Beijing to seek more expensive alternatives and heightening tensions with Washington.
Trump stated the seized oil would be "controlled by me, as President of the United States of America" to benefit both nations, and directed to US ports. He has called for Venezuela's interim president, Delcy Rodríguez, to grant "total access" to the country's oil industry for US and private companies, with US Energy Secretary Chris Wright tasked with executing the deal.
However, significant scepticism surrounds the plan. Major US oil firms like Chevron, ConocoPhillips, and ExxonMobil—whose executives are due to meet Trump—have not publicly committed to the billions in investment required. Analysts doubt listed companies would risk capital in a politically unstable region amid falling prices without ironclad guarantees. Furthermore, reversing years of neglect and corruption in Venezuela's oil infrastructure represents a Herculean task.
A Daunting Challenge for Venezuela's Oil Industry
Venezuela, home to the world's largest crude reserves, has seen its output plummet from a peak of 3.5 million barrels per day 25 years ago to roughly 1 million bpd today—less than 1% of global supply. Analysis by consultancy Rystad Energy suggests restoring production to late-1990s levels could require 15 years of work and up to $185bn in capital spending to repair degraded infrastructure.
The US move follows the recent capture of former president Nicolás Maduro and Trump's vow that US companies would "reignite" Venezuela's struggling oil sector. He has previously labelled the nationalisation of ConocoPhillips and Exxon assets under Hugo Chávez as "the greatest theft in the history of America." Chevron remains the sole US operator there following those seizures.
As the situation develops, the proposed transfer of Venezuelan crude stands to exert continued downward pressure on oil prices while testing the limits of international energy diplomacy and the feasibility of resurrecting a crippled industry.
