Venezuela Crisis Won't Spike Oil Prices Soon, Needs $100bn Investment: Invesco
Invesco's Arnab Das explains that Venezuela's oil crisis won't cause immediate price spikes as production revival requires over $100 billion investment and years of infrastructure rebuilding. While Brent and WTI rose 1% initially, the impact is expected to be long-term disinflationary. ONGC Videsh faces continued challenges with its Venezuelan operations producing only 5,000-10,000 barrels daily, with $536 million in unpaid dividends.
*this image is generated using AI for illustrative purposes only.
Oil markets are unlikely to see sharp price spikes from recent US actions in Venezuela, as restoring the country's oil production will require years and massive capital investment exceeding $100.00 billion, according to Invesco's Global Economic Counsellor Arnab Das.
Speaking to ET Now, Das emphasized that Venezuela's vast reserves don't translate to immediate supply power. Oil prices edged higher in early trade, with Brent and WTI rising about 1.00%, but the expert described this as modest given the geopolitical significance, expecting any impact to be long-term and potentially disinflationary rather than an immediate supply shock.
Current Market Response and Price Movements
Early market signals show mixed responses across asset classes. Brent crude initially slid as much as 1.20% to $60.00 a barrel after recent developments, while West Texas Intermediate crude fell 0.40% to $57.11 a barrel. However, prices have since recovered with both benchmarks rising approximately 1.00% in subsequent trading.
| Asset Performance: | Initial Movement | Current Trend |
|---|---|---|
| Brent Crude: | -1.2% to $60.00/barrel | +1.0% recovery |
| WTI Crude: | -0.4% to $57.11/barrel | +1.0% recovery |
| Spot Gold: | +0.7% to $4,364.61/ounce | Continued strength |
| Silver: | +1.0% | Safe haven demand |
Precious metals continue benefiting from geopolitical uncertainty, with silver climbing 1.00% and spot gold rising 0.70% to $4,364.61 an ounce. "Gold continues to attract flows because it fills the gap where no credible substitute for the dollar exists," Das noted.
Infrastructure Challenges and Investment Requirements
Das highlighted the structural damage to Venezuela's oil sector from decades of chronic underinvestment and mismanagement at PDVSA. "Any meaningful increase in supply will take a long time," he said, noting that estimates suggest more than $100.00 billion may be required to rehabilitate Venezuela's oil infrastructure.
Key facilities including Jose port, the Amuay refinery, and oil areas in the Orinoco Belt remain operational according to sources. However, drilling assets and production facilities have deteriorated significantly since the late 1990s, requiring comprehensive rebuilding efforts.
| Infrastructure Status: | Current Condition |
|---|---|
| Investment Required: | Over $100.00 billion |
| Jose Port: | Operational |
| Amuay Refinery: | Operational |
| Orinoco Belt Areas: | Operational |
| Overall Capacity: | Structurally damaged |
"There will be interest from global oil companies, but not quickly. Capital will come only once there is clarity on governance, contracts and stability," Das explained, adding that sanctions and export restrictions are unlikely to be lifted in the near term.
Implications for Indian Markets and ONGC
For Indian markets, the development carries significant implications given the country's 85.00% crude import dependency. State-run ONGC Videsh Ltd remains exposed through its joint operation of the San Cristobal oilfield in eastern Venezuela, where output has slumped to 5,000–10,000 barrels per day due to sanctions.
| Indian Market Impact: | Current Status |
|---|---|
| Crude Import Dependency: | 85% of oil needs |
| ONGC Current Output: | 5,000–10,000 barrels/day |
| ONGC Potential Capacity: | 80,000–1,00,000 barrels/day |
| Outstanding Dividends: | $536.00 million |
| Total Recovery Potential: | Close to $1.00 billion |
Venezuela has failed to pay ONGC Videsh $536.00 million in dividends due on its 40.00% stake in the field. Once sanctions ease, OVL could potentially revive output significantly and recover close to $1.00 billion in past dues.
Dollar Dominance and Geopolitical Outlook
Addressing concerns about Venezuelan oil sales to China in yuan potentially weakening US dollar dominance, Das said the impact would be limited. "Venezuela remains a marginal oil exporter in global flow terms, even if its reserves are large. There is still no real alternative to the dollar," he explained.
Regarding US President Donald Trump's remarks on potentially accelerating tariffs on India, Das characterized the comments as pressure tactics rather than direct escalation. "Tariff threats are more likely negotiating tools than indicators of imminent disruption," he said, adding that India's macro position remains relatively resilient aided by lower oil prices and ongoing domestic policy reforms.
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