Political changes in Venezuela and the lifting of sanctions could lead to higher oil production, potentially keeping downward pressure on Brent prices. In practice, however, the situation is more complex, as increasing output requires significant investment and time. Let’s discuss this topic and make a trading plan.
The article covers the following subjects:
Major Takeaways
- Escalating geopolitical tensions failed to push Brent higher.
- The increase in oil production in Venezuela will take time.
- OPEC+ did not rush to boost production.
- Consider selling Brent, targeting the $56.5 level.
Monthly Fundamental Forecast for Brent
The market has grown weary of geopolitical shocks that fail to translate into real supply disruptions. Sanctions against Russia did not trigger a supply shock, and after reports that US authorities detained Nicolas Maduro, investors began reassessing the potential impact on the oil market. Judging by the decline in prices, the market is leaning toward a bearish scenario.
Although Venezuela produces only about 1% of global oil output, US estimates suggest it holds roughly 17% of global reserves. In theory, this gives Washington considerable leverage over a major potential source of supply. Lifting sanctions could eventually lead to a sharp increase in Venezuelan production and exports. For now, however, Donald Trump continues to take a hard line toward Caracas, and the embargo remains in place. This stance hits China particularly hard, as it has been the main destination for Venezuelan crude exports.
Nevertheless, the market remains skeptical about any rapid increase in production. According to Jefferies, Venezuela would need three to five years to raise output by 500,000 barrels per day. The country’s oil industry is in decline and requires substantial investment, but with oil prices under pressure and political uncertainty still high, it is unclear which US companies would be willing to commit capital.
Floating Oil Storage Trends
Source: Bloomberg.
UBS expects Brent to rise to $62 by the end of Q1 and to $67 by year-end. Goldman Sachs, by contrast, forecasts a decline to $56. Moreover, the current drop in prices is driven by concerns that Venezuelan oil stored on tankers could return to the market.
OPEC+ is also predicting a bearish scenario. The alliance has chosen not to raise production, prioritizing stability over aggressive action. In its view, geopolitical factors tend to fade with time. This stance contrasts with projections from the IEA and the US government, which expect a surplus of around 2 million barrels per day in the oil market in 2026. These expectations weighed heavily on prices in 2025, with Brent and WTI losing about a fifth of their value, posting their worst performance since 2020.
Oil Trends
Source: Bloomberg.
Venezuela needs time, political stability, and the lifting of US sanctions to ramp up oil production. This is a long process, so Brent’s longer-term price outlook will be shaped more by supply and demand than by geopolitics. In the short term, however, the potential release of oil held in floating storage on tankers remains a bearish factor for Brent.
Monthly Trading Plan for Brent
The bearish trend in oil remains intact, along with the bearish target of $56.5. Traders had an opportunity to open more short trades when Brent fell to $61.15. The recommendation remains unchanged: sell oil on rebounds.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of UKBRENT in real time mode
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteFinance broker. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2014/65/EU.
According to copyright law, this article is considered intellectual property, which includes a prohibition on copying and distributing it without consent.