A deal struck between Venezuela and the U.S. to allow more Venezuelan oil exports in return for political reform will boost global oil supplies and could make a small dent in prices. While Venezuela’s oil production remains relatively low, it could be enough to nudge the market back into balance after several months of undersupply.
With the sanctions on pause, Venezuela could increase production by about 200,000 barrels a day, Rystad Energy predicts. The Energy Information Administration predicted earlier this month that the oil market will be undersupplied by 200,000 barrels through the first quarter of 2024, raising the possibility that Venezuela could plug that gap.
The deal with Venezuela shows just how much the Biden administration is intent on finding new oil supplies to replace OPEC oil that is currently being held off the market. U.S. production has recently hit record highs, but domestic output isn’t enough to make up for a shortfall from other countries. Saudi Arabia, for instance, is producing about 3 million barrels less than it did at its peak.