HSBC and Goldman Sachs' latest research reports reveal a harsh reality: the recovery of Venezuela's oil sector will be extremely slow, costly, and partial.
The White House has reportedly urged major U.S. oil companies to make substantial investments in Venezuela to repair its crude oil extraction infrastructure.
Despite Trump's commitment to massive funding and the country's nominal possession of the world's largest reserves, most of these "paper barrels" are not commercially viable for extraction, and the market should not anticipate any "V-shaped" recovery.
According to analysis from HSBC and Goldman Sachs on January 5, short-term production may even face risks of further decline due to sanctions and chaos. For investors, the upheaval in Venezuela will not trigger a sharp spike in oil prices in the near term because the global market is already severely oversupplied; however, in the long run, if hundreds of billions of dollars in capital are indeed deployed, its potential production return could become a core bearish factor suppressing oil prices post-2027.
Due to sanctions and storage limitations, short-term production faces "shut-in" risks.
While the market discusses production restoration, HSBC points out that Venezuela's oil industry is currently trending towards contraction, not expansion. Following the collapse of the Maduro regime on January 3, 2026, the U.S. did not immediately lift sanctions on Venezuela, and the embargo on oil tankers remains in effect. This policy has resulted in Venezuela struggling not only to export crude oil but also to import the naphtha needed to dilute its heavy oil.
Data already shows signs of deterioration: in December 2025, Venezuela's crude oil exports had fallen to 500,000 barrels per day. With exports blocked and domestic storage tanks full, PDVSA has been forced to instruct joint ventures to reduce output, with at least 200,000 to 300,000 barrels per day of capacity already shut down.
Goldman Sachs' analysis further corroborates this, indicating that recent production may have already declined to around 800,000 barrels per day due to inventory issues. Even in an optimistic scenario where the new government receives comprehensive sanctions relief, Goldman Sachs expects production to increase by only 400,000 barrels per day by the end of 2026; in a pessimistic scenario of escalating chaos, production could fall by a further 400,000 barrels per day.
"Paper wealth" versus real-world challenges: Infrastructure rebuilding requires hundreds of billions of dollars.
Media often cite Venezuela's possession of the "world's largest oil reserves (300 billion barrels)," but HSBC emphasizes that this is highly misleading from a commercial perspective.
The vast majority of Venezuela's reserves are located in the Orinoco Belt, consisting of high-cost extra-heavy oil. According to Rystad Energy, the country's commercially viable proven reserves are only 3 billion barrels, and its technically recoverable resources (55 billion barrels) also lag far behind those of the United States, Saudi Arabia, and Russia.
More severe is the comprehensive collapse of physical infrastructure. After years of asset erosion, equipment dismantling, and lack of maintenance, the country's infrastructure is in disarray. Pipeline networks are severely corroded, and upgrading equipment is dilapidated. Industry estimates suggest that restoring production to its 1970s peak level would require annual investments of approximately $10 billion over the next decade, totaling over $100 billion. Even restoring production to a level of 1.5-2 million barrels per day would require repairing thousands of kilometers of pipelines and power facilities, a process HSBC estimates would take at least a decade.
Return of Western oil majors: Low willingness and legal quagmires.
Trump's hope rests on U.S. oil majors using their technology and capital to lead the rebuilding effort, but this faces significant commercial obstacles.
HSBC notes that, apart from Chevron, which still holds a special license to operate locally, majors like ExxonMobil and ConocoPhillips left as early as 2007 following asset expropriations.
Currently, Venezuela still owes foreign oil companies approximately $20 to $30 billion in debt. Until legal disputes are resolved, fiscal terms improved, and the political situation is completely stabilized, Western oil companies will adopt an extremely cautious approach.
ExxonMobil's CEO has explicitly stated that investment depends on economic returns. Given the high extraction costs of Venezuela's heavy oil and the downward pressure on global oil prices, private capital lacks the incentive for a large-scale return to the country.
Venezuela's limited impact within a globally oversupplied structure.
Regardless of how the situation in Venezuela evolves, its short-term impact on global oil prices will be diluted by the market structure. HSBC predicts that the global oil market will face severe oversupply in 2026, peaking in the first quarter, with an average annual surplus of about 2.1 million barrels per day.
Against this backdrop, even a complete disruption of Venezuela's current exports of approximately 500,000-600,000 barrels per day would not trigger a sustained price spike.
Goldman Sachs maintains its forecast for an average Brent crude price of $56 per barrel in 2026. In the long term, only if Venezuela's production unexpectedly rebounds to over 2 million barrels per day by 2030 could it combine with increased production from the U.S. and Russia to impose an additional downside risk of about $4 per barrel on oil prices. However, considering the aforementioned infrastructure and funding obstacles, the probability of this long-term risk materializing remains questionable.
