Up to 50 mn barrels of Venezuela oil to US: Impact on China, oil prices

Mirae Asset Sharekhan expects global oil market to be in surplus for a pro-longed period. It predicts WTI crude oil to hit $48 per barrel-mark in 2026

US invasion of Venezuela changes global energy canvas

 

The US began the year with geopolitical shocker as it launched 'Operation Absolute Resolve', a decisive military intervention in Venezuela that culminated in the capture of President Nicolás Maduro. This "geopolitical shock" has fundamentally altered the global energy landscape, positioning the US to potentially integrate Venezuela's 303 billion barrels of proven reserves --- the world’s largest -- into a Western-aligned supply chain.

 

The shift directly challenges the Opec+ alliance, which previously relied on production quotas to maintain price floors. While Venezuela currently produces only 800,000–900,000 barrels per day (bpd), US officials and analysts estimate that with sanctioned-free investment, output could surge by 500,000 to 1 million bpd within two years. This looming "super glut" has already forced Opec+ to pause planned supply increases for Q1 2026. By securing a long-term "energy bridge" in the Western Hemisphere, the US has significantly diminished the group's influence as the primary global price makers.

 

Market reaction

Global oil prices edged higher earlier this week due to Opec's restriction on further increase in output until the end of Q1-2026. However, prices have started heading lower amid concerns about energy demand after Saudi Arabia cut the price of its Arab Light crude for February delivery to customers for a third month. Weakness in the crude crack spread is negative for oil prices.  

 

The crack spread tumbled to an 11-month low on Tuesday, discouraging refiners from purchasing crude oil and refining it into gasoline and distillates. 

Impact on China

For years, Venezuela served as a critical non-Western energy source for China, bypassing US-controlled shipping lanes. Approximately 80 per cent of Venezuela's oil exports (roughly 600,000–700,000 bpd) currently goes to China. Now President Trump said that Venezuela will direct 30-50 million barrels of oil to US gulf refineries worth around $2 billion. 

 

The decision could affect many of China's "teapot" (independent) refineries, which are configured specifically for Venezuela's heavy Merey crude.

Opec+ decision

After restoring 2.9 mbpd or 2.5 per cent of halted global oil output in 2025, Opec+ confirmed on January 4, 2026, that it would pause production hikes through Q1-2026. Following a final 137,000 bpd increase in December 2025, the group is reacting to a projected 4.0 million bpd global surplus. 

 

With 1.2 million bpd of original 2024 cuts still to restore, members face mounting pressure from surging non-Opec supply and the recent US intervention in Venezuela. November production fell to 29.09 million bpd, as the alliance prioritized price stability over market share.

Asian demand in focus  

Asian market will continue to remain flag bearer for crude oil demand in 2026 with India leading the incremental demand by 05-0.7mbpd, followed by China, and other emerging economies. China and India make up more than 1/5th of global crude oil demand. Any slowdown in these nations will have an adverse impact on prices. 

The Great Decoupling: Gasoline vs. Electrons

The global transition to electric vehicles (EVs) has accelerated into a structural "demand erosion" phase as of early 2026. The shift is most visible in China, where the domestic market has reached a tipping point, fundamentally decoupling economic growth from oil consumption. By the start of 2026, the global automotive landscape has shifted dramatically:

 

Market penetration: EVs and Plug-in Hybrids (PHEVs) are now capturing 25 per cent of all new car sales globally. In China, this figure surpassed 50 per cent in 2025, with December 2025 alone seeing 1.19 million units sold.

 

BYD's dominance: In 2025, BYD solidified its position as the world's largest EV maker, delivering 4.6 million vehicles (up 7.7 per cent YoY), while Tesla's global deliveries fell 9 per cent to 1.64 million units.

 

Oil displacement: The IEA reports that EVs displaced 1.3 mb/d of oil in 2024, a figure surging toward 5.4 mb/d by 2030. Consequently, Chinese gasoline demand fell 6% in late 2025, signalling that transportation oil use (60 per cent of global demand) has likely peaked.

Oil price outlook

 

We expect global oil market to be in surplus for a pro-longed period. It could peak by mid-year, keeping oil prices in check. We further lower our price forecast for WTI from $52 to $48 by 2026, with Q1-2026 oil price pegged at $54/bbl from a prior forecast of $56/b.    ==========  Disclaimer: Mohammed Imran is a research analyst at Mirae Asset Sharekhan. Views expressed are his own.