Chennai, Jan 5 (.) The US strike in Venezuela and arresting the latter’s President Nicolas Maduro, and his wife, will trigger a short-term volatility in crude oil and gold, and for Indian equities, the impact remains largely neutral beyond indirect effects from oil price movements, experts said.
“For the Investor perspective, this will trigger short-term volatility in crude oil and gold that masks a far more profound medium-term structural shift. In the short term, a “fear premium” is causing extreme volatility in heavy-sour oil spreads due to the naval blockade of Venezuelan tankers, creating immediate shortages for Gulf Coast refineries,” said Aamir Makda, Commodity & Currency Analyst, Choice Broking.
According to Makda, the medium-term outlook appears bearish as the removal of Maduro may unleash Venezuela’s significant reserves, potentially increasing production by 500,000 to 1 million barrels per day within two years if US companies resume operations. This may cap the oil price upside in the near future as the market anticipates a future supply glut post-transition.
“For gold, this event is a tactical accelerator, but it does not change the core medium-term thesis, which remains tied to the Federal Reserve,” Makda remarked.
The escalation of US-Venezuela tensions has imposed a significant “geopolitical risk premium” on energy markets. While the immediate effect on global oil supply is limited, the change in control over Venezuela’s vast oil reserves poses critical implications for heavy crude pricing and long-term supply forecasts.
Current Venezuelan production stands at 800,000 to 1.1 million barrels per day, roughly 1 percent of global supply. The blockade has particularly hindered exports to China, risking a short-term production drop by up to 50 percent due to logistical issues. Venezuela’s heavy-sour crude, vital for certain refining processes, would face a quality squeeze, constraining the global market even if total oil supply remains stable, Makda said.
According to Ankita Pathak, Head of Global Investments, Ionic Asset by Angel One, “In the longer term, weaker oil leads to lower US inflation, potentially more rate cuts and a weaker dollar, and therefore helps the emerging market trade. However, in the short term, China is likely to face pressure both from its oil supply and from loans it previously extended to Venezuela that may not be honoured.”
Pathak said the Latin American (LATAM) equities can face a heightened risk premium. Risk assets generally may face some volatility in the short term. However, we believe it may be a good time to add amidst volatility, especially in geography and sectors not affected by oil prices. The diplomatic meetings ahead will be key to seeing how the event unfolds hereon.
On the developments in Venezuela and its impact on India, Madan Sabnavis, Chief Economist, Bank of Baroda, said, “Venezuela is not really a significant supplier of oil and is very low down the order. It is less than 1 percent as of FY25. However, the price paid is one of the lowest and in FY25 was USD 496/tonne as against an average of USD 586/tonne.”
But imports have turned even less significant subsequently.
“Besides, if the story plays out as the US has said, there could be an increase, albeit marginal, in global supplies, and prices should come down instead of going up. Besides, India buys at different prices from various countries, and the overall cost should not be different from what it is today. The reaction is knee-jerk and should correct in a few sessions,” Sabnavis said.
. VJ VAN .