Oil prices are expected to face muted immediate impact after the US attack on Venezuela, but that assessment masks where the real market risk is building, warns the CEO of one of the world’s largest independent financial advisory organizations.
The dominant view across energy markets is that crude prices will absorb the shock.
Nigel Green, CEO of deVere Group, says: “Global supply remains ample, Venezuelan production represents a small share of worldwide output, and there’s no clear evidence yet of sustained disruption to physical flows. On those terms, restraint in headline pricing looks rational.”
He notes that logic explains the short-term calm, but not the broader significance.
“Limited price impact reflects where the barrels go and how much spare capacity exists. It doesn’t mean the risk is negligible.”
A central reason expectations remain contained lies in destination. The majority of Venezuelan crude exports flow to China, with limited exposure to US or European refiners.
“This concentration reduces the immediate sensitivity of Western benchmarks and dampens the likelihood of a sharp spike in Brent or WTI. It contains the headline reaction, but it doesn’t remove systemic risk.”
In the short term, oil pricing reflects arithmetic. Oversupply cushions disruption. Alternative barrels remain available and inventory levels provide cover. From a volume perspective, the system copes.
“This is why prices may hold in the immediate aftermath of today’s strike,” Nigel Green says. “It isn’t proof that the market is comfortable, it’s proof that the market is liquid.”
The pressure point sits elsewhere. Venezuelan crude is heavy, specialized, and harder to substitute quickly.
Exports rely on ageing infrastructure, exposed ports, and politically sensitive shipping routes. Even without a sharp fall in production, friction can emerge through insurance, freight, financing, and compliance channels.
“Oil markets tighten through logistics before they tighten through shortages,” Nigel Green says. “Those costs show up unevenly and often away from the headline contract.”
Medium-term expectations depend on duration. If tension proves short-lived, the episode fades into background noise. If pressure persists, operational strain compounds.
“Venezuela’s energy system has limited resilience after years of underinvestment, leaving little tolerance for prolonged uncertainty.
“Time is the multiplier. Short events test sentiment. Extended pressure tests capacity.”
The distinction matters because today’s oversupply is conditional. It assumes steady flows elsewhere, disciplined producers, and no overlap with other geopolitical strains. History shows those assumptions can unwind faster than expected.
Over the longer term, oil prices respond less to individual headlines and more to confidence in energy security. When confidence holds, premiums stay suppressed. When it weakens, protection costs rise, even without visible shortages.
Why oil prices matter extends far beyond crude itself. Oil feeds directly into transport costs, food production, manufacturing inputs, and household budgets. It anchors inflation expectations and influences policy constraints across economies.
“Energy risk shapes behaviour before it shapes data,” Nigel Green says.
Governments feel the effect through trade balances, currencies, and fiscal planning. Energy-importing nations face higher cost exposure when stability weakens. Exporters confront revenue uncertainty that complicates budgeting and investment.
“Oil connects geopolitics to public finance,” the CEO comments.
Corporations feel the impact through margins, logistics, and delayed capital decisions. Energy uncertainty raises operating risk and weakens earnings visibility across supply chains.
“When energy confidence weakens, business caution follows.
“Investors watch oil because it signals more than price. It reshapes correlations, shifts sector leadership, and influences defensive positioning. Energy shocks rarely remain confined to a single market.”
He concludes: “The focus on a limited immediate impact risks missing the broader signal.
“Oil doesn’t need to surge to matter. It only needs to unsettle confidence, and that process is likely already underway.”
Oman Observer is now on the WhatsApp channel. Click here
