Following the arrest of Venezuelan President Nicolás Maduro, one of the key questions troubling investors is how this event could impact the prices of strategic commodities. This primarily concerns oil, as Venezuela is a country with abundant reserves and an oil-producing nation.

How could Maduro's arrest impact oil prices?

According to Milli Majlis deputy Vugar Bayramov, forecasts regarding the impact of events in Venezuela on oil prices are being considered under several scenarios.

The deputy noted that despite the differences in data from international organizations on Venezuela's daily oil production, all indicators indicate that the country does not hold a key position in the market.

"According to the U.S. Energy Information Administration (EIA), Venezuela ranks 18th among oil-producing countries with daily production of 1.098 million barrels. The EIA also reports that 72 percent of global oil production is accounted for by ten countries. Trading Economics provides similar, though not identical, data: with daily production of 1.142 million barrels, Venezuela ranks 17th," he noted.

Vugar Bayramov emphasized that another important aspect is that Venezuela is not among the top twenty oil exporters. According to him, with 438,000 barrels of oil per day supplied to the global market, the country ranks 22nd among exporters.

"Low oil export volumes are, of course, related to the sanctions imposed on Venezuela. In 2024, Saudi Arabia accounted for 15.2 percent of global oil exports by value. The top five also included Russia (9.7 percent), the United States (9.4 percent), the United Arab Emirates (9.1 percent), and Canada (8.5 percent)," the deputy noted.

Moreover, he added, the most important factor for investors is that Venezuela ranks first in the world in terms of oil reserves. It accounts for 18.2 percent of the world's proven oil reserves. Next come Saudi Arabia (16.2 percent), Canada (10.4 percent), and Iran (9.6 percent).

"This means that the potential development of Venezuela's oil reserves by the United States could ultimately lead to significant volumes of oil entering the market and a sharp increase in supply. This does not bode well for prices. For comparison, following the arrival of American investment in Iraq's oil sector, the country has sharply increased production and currently accounts for 8.0 percent of global oil exports by value. However, the scenario of a sharp increase in supply will take time to materialize, as modernizing Venezuela's oil infrastructure requires not only financial resources but also significant time investment. This means an additional time lag before large volumes of Venezuelan oil enter the market," he explained.

Another possible scenario, according to the MP, involves the risk of chaos in Venezuela. In this case, the oil market may react differently. However, even in this scenario, a sharp rise in oil prices is not expected. He explained that Venezuela's current production and export volumes don't have a significant impact on the market, and even a reduction in them won't cause a significant price increase.

"All of this allows us to conclude that, even if not in the short term, a significant decline in oil prices is inevitable in the medium term. This, in turn, further increases the priority of economic diversification and replacing oil revenues with other sources," Vugar Bayramov concluded.