Venezuelan turmoil: what will be the direction of oil prices and the US dollar next week?

Oil Supply Expectations Bearish, WTI Crude Faces Continued Pressure

On Saturday (January 3rd), the United States launched a large-scale military operation against Venezuela. As the situation develops, the oil exports of the Venezuelan state oil company (PDVSA) have been completely paralyzed—tankers are ceasing operations, and storage facilities are rapidly filling up. In the short term, this indeed acts as a bearish factor for oil prices.

However, from a medium-term supply perspective, the situation is the opposite. Venezuela’s current daily production is only about 1 million barrels (less than 1% of global output), with previous exports around 500,000 barrels. Once the U.S. “takes over” the country’s oil industry, with sanctions lifted and American oil companies entering, market expectations suggest future exports could rise to nearly 3 million barrels. In the context of global oil oversupply, the anticipated increase in supply is enough to exert long-term downward pressure on oil prices.

Energy industry consultant David Goldwyn pointed out that the key variable lies in the infrastructure rebuilding cycle—U.S. companies would need several years to restore Venezuela’s oil production capacity. Under uncertain new government policies, no oil company is willing to invest billions of dollars in long-term projects. This means that Venezuela’s oil production recovery in the short term could be slower than market expectations.

Technically, WTI crude faces strong resistance in the $59.0-$61.5 range. If the rebound is blocked, the medium-term downtrend is likely to continue, with the risk of further declines to $55.0 or even $50.0.

Geopolitical Tensions Rise, US Dollar Seeks Safe-Haven Demand

The deeper implication of this event lies in the U.S. strategic realignment globally. Venezuela holds the world’s largest proven oil reserves (over 3 trillion barrels), and controlling this country’s oil means the U.S. can strengthen its influence in the global energy pricing system. More importantly, it will further solidify the dollar-oil system, enhancing the dollar’s hegemonic position in global finance.

Meanwhile, as tensions between the U.S. and Iran, the Russia-Ukraine conflict, and geopolitical entanglements with Latin American countries continue to ferment, capital is accelerating to flow back into the dollar seeking safety. The Trump administration hinted that other Latin American countries like Cuba could also become future policy targets, further increasing regional risk premiums.

The Federal Reserve has already cut interest rates to 3.5%-3.75% by December 2025, and the market expects two more rate cuts in 2026. In a liquidity-friendly environment, the U.S. needs to demonstrate the safety of dollar assets to global capital. The Venezuela incident provides this opportunity—by controlling key global energy resources, it enhances the attractiveness of dollar assets.

On the technical side, the US dollar index has recorded three consecutive days of gains, and after stabilizing above 98.0, it is expected to rebound further, challenging the 99.0 and even 100 levels. Next week, the dollar may continue to maintain its strength, becoming the main bearish force against commodities.