US Attacks Venezuela: Here's why oil prices did not see a major reaction despite geopolitical tensions

Crude oil prices fell in early trading on Monday, January 5, despite rising geopolitical tensions after the US attack on Venezuela over the weekend and a subsequent arrest of its President Nicolas Maduro and his wife.

Brent Crude prices remain near the mark of $60 a barrel, while West Texas Intermediate trades near $57 per barrel. US President Donald Trump has highlighted that sanctions on Venezuela's oil industry will remain in place, although US companies will spend "billions" in fixing the country's "broken energy infrastructure", in what is said to be a lengthy process.

OPEC+ also stuck to plans to pause supply hikes in the January-March quarter as global markets continue to face a supply glut and more clarity is awaited on Venezuela.

Although Venezuela has the largest proven oil reserves in the world, its current production accounts for only 1% of the global output due to the US sanctions.

Experts believe that the prices have not moved much as the conflict came at a time when markets are already oversupplied and demand remains weak, a pattern generally seen in the first quarter of the new year.

"Despite this being a huge geopolitical event that you would normally expect to be positive or push up oil prices,” he said, “the bottom line is there’s still too much oil in the market, and that’s why oil prices will not go ballistic," Arne Lohmann Rasmussen, chief analyst and head of research at A/S Global Risk Management told CNBC.

Some analysts are also of the view that instead of rising, oil prices may fall further in case sanctions on Venezuela are lifted, and more barrels are pumped into the market.

Saul Kavonic of MST Financial told CNBC that if a new government in Venezuela is formed and sanctions are lifted, the exports from the country could reach 3 million barrels per day in the medium-term.

There is still plenty of clarity awaited from Trump's remarks as to which US companies will spend how much to fix Venezuela's infrastructure, what happens to its oil reserves, and how will the country run another nation when its military, parliament and other ruling members are still in place.

Brent Crude futures are currently trading 0.2% lower on Monday morning at $60.61. Prices fell 19% in 2025, marking their worst year since 2020.

(With Inputs From Agencies)