Trump’s Venezuela Oil Push Risks Squeezing US Producers

President Donald Trump’s renewed push to reintegrate Venezuelan crude into the US energy market has heightened tensions between refiners and domestic producers.

Under the proposed strategy, 30–50 million barrels of Venezuelan oil, primarily heavy sour crude, could be sent to US refineries this year if sanctions are eased and shipments resume. Venezuela, home to some of the world’s largest proven oil reserves at ~300 billion barrels, has traditionally relied on US refining capacity for heavy crude processing.

This shift comes as the global oil market contends with slack demand growth and significant inventory overhangs.

US Production Near Record, But Growth Slowing

US crude output has been one of the few consistent bright spots in the global supply picture. In 2025, production averaged near ~13.6 million barrels per day (bpd), the highest on record, according to Energy Information Administration (EIA) estimates.

However, EIA forecasts suggest output could ease slightly in 2026 to roughly 13.5 million bpd, reflecting capital discipline among shale firms facing weaker price signals. Investment in new drilling has slowed, with rig counts in key basins such as the Permian and Eagle Ford down 8–12% from year-ago levels, according to industry data.

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Oil Prices Remain Under Pressure

Benchmark prices such as WTI have struggled to sustain rallies above key resistance levels. After peaking near $85 per barrel in early 2025, average prices settled around $70–$75 for much of the year.

With Venezuelan barrels entering the market at a discount, often $5–$10 below benchmark prices, traders and analysts say heavier supply could act as a de facto price ceiling.

Refiners See Opportunity; Producers Brace for Impact

US Gulf Coast refiners operate complex facilities configured to process heavy sour crude. For them, an influx of Venezuelan barrels could improve throughput economics by reducing feedstock costs and raising refinery margins.

By contrast, US shale producers, particularly smaller independents, face margin compression. Many shale wells have breakeven prices near $55–$60 per barrel, and sustained prices in the $60–$70 range could restrain cash flow and capital budgets.

Analysts note that larger producers with diversified assets may weather the trend better, but smaller players may delay drilling and cut payrolls if margins tighten further.

Global Inventories Remain Elevated

Despite periodic cuts by major producers, global crude inventories remain above the five-year seasonal average, a key metric watched by traders. OECD commercial stocks have fluctuated near ~2.7 billion barrels, exacerbating price pressure amid lackluster demand growth in Asia and Europe.

Gasoline Prices Reflect Oversupply

The broader market pressure shows up at the pump. US retail gasoline prices, which had risen sharply earlier in the decade, have declined for the third consecutive year. The national average price per gallon now sits near $3.00–$3.10, significantly below the $4.00+ peaks seen in 2023–24, according to AAA data.

Lower consumer prices help households but reduce cash flows for producers already facing investment headwinds.

Trade-offs in Energy Policy

Trump’s broader energy posture has revived the old slogan “drill baby drill,” promoting US energy dominance and export expansion. But integrating Venezuelan crude — a foreign heavy grade, into US refining raises strategic questions.

While the move supports refinery economics and keeps consumer prices in check, it may undercut the very domestic producers Trump has championed. Some industry executives argue that a coordinated production strategy with OPEC+ partners, combined with a more stable sanctions policy, would better support producers without worsening oversupply.

Investors Watch Price Signals

Market participants say the next few quarters will be critical. If Venezuelan crude imports materialise and global demand remains subdued, price pressure could extend, encouraging producers to focus on cost cutting and balance-sheet strength rather than aggressive growth.

For refiners, cheaper heavy crude may unlock margin opportunities. For producers, especially in shale basins, maintaining profitability in a capped pricing environment may require greater efficiency and capital restraint.

-With inputs from Reuters

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