On January 3rd, the U.S. captured Venezuelan President Nicolás Maduro, expanding its economic influence particularly in Venezuela’s oil sector.
On January 6th, President Donald Trump announced that Venezuela’s interim authorities will turn over 30-50 million barrels of sanctioned oil worth US$2.00–2.75 billion at current market pricing. The mechanisms for (and timing of) delivery are still unclear, though Trump has stated that the oil will be shipped by storage vessels directly to U.S. unloading docks.
Oil markets have reacted slightly bearishly to this week’s developments, with WTI oil prices down around 1.5% to just under $57/bbl. This is likely temporary on fears that Venezuelan oil will add to an already-oversupplied market.
We are leaving our WTI oil price forecast unchanged at $58/barrel for Q1 2026. While it is not our base case, Canadian Western Canada Select (WCS) prices may face downward pressure if Venezuelan sanctions are relaxed and demand for Canadian oil decreases. This scenario could increase the WCS discount to WTI by $2-3 per barrel, potentially reversing the positive effects from the Transmountain Pipeline Expansion, which had helped compress the spread over the past year.
The Numbers in Context
The current global oil surplus is estimated at 2-2.5 million barrels per day (bpd). Economically, this one-off oil flow of 30-50 million barrels would not materially impact market balances.
These barrels represent about 30 to 50 days of Venezuela’s current oil production, which is around 1 million/bpd. Due to sanctions, underinvestment, and outdated infrastructure, Venezuela produces far less than its historical highs of 3-3.5 million/bpd. Increasing output would require several years and billions of dollars in investment.
With nearly 20 million/bpd consumed in the U.S., this new oil supply represents approximately two and a half days of national usage.
Does This Have an Impact on Canada?
In the near-term, this is likely a low-impact event for Canada.
- Any imports of Venezuelan oil to the U.S. would compete directly with Canadian crude in the U.S. Gulf Coast market, which currently receives only 10% (~400k/bpd) of total Canadian shipments to the U.S.
- A more probable outcome is that only a limited portion of Canadian oil would be substituted, with relatively modest impacts on the national economy. Alberta could experience more significant effects, but only in the event of a complete near-term and sustained transition to Venezuelan oil in the Gulf Coast.
Total Canadian crude exports to the United States are around four times greater than Venezuelan exports, with ~70% of that consumed in the U.S. Midwest. The U.S. Midwest (PADD II) imports almost exclusively from Canadian sources due to existing pipeline infrastructure. For Venezuelan crude to reach the Midwest, extensive modifications to pipelines would be required to enable south-to-north flow—a process that presently does not make much economic sense and that would require significant time to implement.
Longer-term, significant U.S. investment would be needed to boost oil output and increase pipeline capacity in Venezuela. This strengthens the case for Canada to expedite a new oil pipeline that builds out capacity for Asian shipments. China, the number one buyer of Venezuelan crude, may need to strategically reorient their import sources, further buoying the case for Canada to diversify its energy trade.
