- Since 2019, more than 50 countries, including the US, UK and the EU have refused to recognise Nicolás Maduro as Venezuela’s head of state.1
- In the 1970s Venezuela was producing 7% of global oil output yet was responsible for just 1% of global production in 2025.2
- The Dragon natural gas field, in Venezuelan waters, holds an estimated 120 billion cubic metres of gas, or around three times as much as the UK uses in a year.3
On 3 January 2026, the United States captured Venezuelan President, Nicolás Maduro, and his wife, Cilia Flores, in Operation Absolute Resolve. This demonstrates an ongoing policy shift in the United States in using its armed forces more freely to achieve its aims. It also has a potentially significant impact on the oil market as Venezuela is reported to have the largest oil reserves in the world.4
The focus of this weekly note is the oil market; however, it would be remiss to not offer a very broad history of the ex-leader of Venezuela, leading up to his January 2026 capture. Nicolás Maduro Moros became president of Venezuela following Hugo Chávez’s death in 2013 and declared victory in an election in 2018. In 2019, the National Assembly of Venezuela declared that Maduro had usurped power and was not the president of Venezuela. In the July 2024 election, Maduro again declared himself the victor despite evidence to the contrary. Since 2019, more than 50 countries, including the US, UK and the EU have refused to recognize Maduro as Venezuela’s head of state.5
In March 2020, Maduro was charged in absentia in the Southern District of New York for various crimes including narco-terrorism and conspiracy to import cocaine.6
Moving back to oil: Venezuela’s self-reported crude oil reserves tripled from around 100 billion barrels in the early 2000s to 300 billion barrels in the late 2000s. Much of the oil is extra-heavy, which has low recovery and a high cost to produce, and the self-reporting means we should be sceptical of the numbers.7
The chart below from the U.S Energy Information Administration8 highlights the Venezuelan reported reserves against the rest of the world. The data is from 2023 due to limitation in reliable data sources.
Venezuela was producing as much as 3.5 million barrels per day (bpd) of crude in the 1970s, or 7% of global oil output. Production fell below 2 million bpd during the 2010s and averaged some 1.1 million bpd last year, or just 1% of global production9.
In the immediate aftermath of Maduro’s capture, we have seen anticipation of a big increase in Venezuelan oil production, assuming US oil majors are allowed to enter the country to rapidly boost production back to peak levels.
UK energy producer, Shell plc, was noted as targeting a return to Venezuelan natural gas production. The removal of sanctions allows a potential acceleration of the Dragon gas field project, which lies in Venezuelan waters. The Dragon field holds an estimated 120 billion cubic metres of gas, or around three times as much as the UK uses in a year.10
The US oil majors’ share prices initially jumped on the news of Maduro’s capture. Prices have drifted lower as the initial excitement faded, but the market is still baking in some economic potential for oil companies.
Figure 1: Source – AlphaTerminal – selection of oil company share prices plotted over 29/12/2025 to 09/01/2026. Chevron (green), Exxon Mobil (blue) and Conoco Phillips (red).
The oil price reaction has been more muted, with the initial direction of travel being lower, and a subsequent reversion to the mean.
Figure 2: Source – AlphaTerminal – Crude Oil price plotted over 29/12/2025 to 09/01/2026.
Turning to geopolitics briefly, much of the Venezuelan oil output currently goes to China11 which has been cultivating its relationship with Maduro over many years. The capture of Maduro is a clear signal to countries such as China that the US is asserting control over its neighbours and increasing its sphere of influence.
A major development this week has been the effective blockade imposed on Venezuelan oil tankers leaving the country, applying further pressure to the Venezuelan regime and preventing its oil from reaching sanctions-busting jurisdictions.
Bowmore portfolios
We do not own any specific oil-focussed investment funds, although we have recently been exploring broad commodities as a diversifier and an effective hedge against inflation. We see one of the key risks to markets in 2026 being a spike in inflation which commodities tend to defend well against.
On a look-through basis one of our larger holdings in the Core portfolio is Shell, which would benefit from additional production capacity linked to a reduction in Venezuelan sanctions. Shell is the largest holding in the Redwheel UK Equity Income Fund, a dividend-focused value fund. It is also a significant holding in the Artemis UK Select Fund, a high-conviction, style-agnostic fund, as well as in the HSBC FTSE All-Share Index.
Source: AlphaTerminal, data as at 09/01/2026
The value of your investments can go down as well as up, so you could get back less than you invested. Past performance is not a guide to future performance.
Sources:
1. Nicolás Maduro Moros – United States Department of State
2. Venezuela’s oil supply to rise in years ahead and depress prices, analysts say – CNBC Africa
3. Shell eyes return to Venezuela to claim gas billions
4. Organization of the Petroleum Exporting Countries
5. Nicolás Maduro Moros – United States Department of State
6. Nicolás Maduro Moros – United States Department of State
7. Venezuela’s Self-Reported Oil Reserves – Apollo Academy
8. International – U.S. Energy Information Administration (EIA)
9. Venezuela’s oil supply to rise in years ahead and depress prices, analysts say – CNBC Africa
10.Shell eyes return to Venezuela to claim gas billions
11.Donald Trump’s Venezuela risk brings risk to China’s plans – BBC News