US bid to revive Venezuela’s crude sector threatens Canada’s long-term pricing power
Venezuela’s regime change could eventually undercut Canadian heavy oil – but for now, the real risk for investors is long‑term price pressure, not a sudden supply shock.
US President Donald Trump ordered a strike that removed Venezuelan leader Nicolás Maduro and brought him to New York on narco‑terrorism charges, according to CNBC.
Trump said the United States would “run” Venezuela “until such time as we can do a safe, proper and judicious transition,” while Secretary of State Marco Rubio later insisted Washington would not manage the country day to day and would focus instead on enforcing an “oil quarantine,” as per CBC News.
Despite the drama, oil and equity markets barely flinched.
Brent hovered around US$60‑US$61 a barrel and US West Texas Intermediate traded near US$57, while US stock futures and Asian equities moved modestly higher and gold gained just over 1 percent.
Analysts say the muted response reflects the fact that Venezuela currently produces only about 1m barrels a day – less than 1 percent of global supply – after years of nationalization, mismanagement, corruption and US sanctions, according to CBC News.
Arne Lohmann Rasmussen of A/S Global Risk Management told CNBC that traders had already priced in conflict risk and that an oversupplied market with weak seasonal demand would likely cap any Brent move to roughly US$1‑US$2 before prices drift lower.
Bob McNally of Rapidan Energy said on CNBC that even if roughly a third of Venezuela’s output is at risk, he does not see a “meaningful” short‑term threat to global supply.
For Canadian investors, the real story is what happens if Venezuela comes back as a heavy‑oil exporter in a few years.
Both Canada and Venezuela produce heavy crude that US refineries in the Midwest and Gulf Coast are designed to process, The Globe and Mail reported.
In 2013, the US imported about 1m barrels a day from Venezuela. Sanctions later cut those flows to almost nothing and pushed Caracas toward China.
Over the same period, Canadian exports to the US rose from 2.7m barrels a day in 2013 to nearly 4.4m barrels a day by mid‑2024, before easing slightly below 4m barrels as volumes shifted to Asia via the expanded Trans Mountain pipeline, according to The Globe and Mail.
Rory Johnston of Commodity Context told The Globe and Mail that if sanctions ease, the main battleground for Canadian versus Venezuelan heavy crude would be the US Gulf Coast, where Canadian barrels already have a foothold.
He said increased Venezuelan supply could displace some Canadian volumes there, forcing more crude onto Trans Mountain – with higher tolls – or into re‑exports from the Gulf Coast, with added transport costs, and that in both cases Canadian producers would likely face lower realized netbacks.
Johnston added that Canada should still dominate the US Midwest thanks to its existing pipeline network.
At the same time, rebuilding Venezuela’s sector will not be quick.
Roxanna Vigil of the Council on Foreign Relations told CBC News it will take “years, if not a decade or more” and tens of billions of dollars to restore capacity.
Heather Exner‑Pirot of the Macdonald‑Laurier Institute told CBC News that production has “atrophied.” She pointed to the loss of skilled workers after Hugo Chavez fired thousands of PDVSA staff during the 2003 strike.
Legal and political risks also loom.
Columbia University law professor Matthew Waxman told CBC News that international law bars an occupying power from enriching itself with another state’s resources.
He raised the core question of “who really owns Venezuela’s oil?”
Exner‑Pirot told CTV News that Trump’s talk of “running” Venezuela is a medium‑term risk for Canada rather than an immediate threat, and said the Canadian sector should not “panic” but remain competitive.
She argued that Canada has always competed with other oil‑rich states and noted that Prime Minister Mark Carney and Alberta Premier Danielle Smith have been moving to diversify markets and keep Canadian producers competitive, as reported by CTV News.
