Shares of independent shale-oil producers, including Diamondback Energy and Devon Energy, fell last week following the U.S. capture of Venezuelan President Nicolás Maduro and his wife, Cilia Flores. The development introduced the possibility of increased Venezuelan oil production, potentially exacerbating an existing global supply glut and further depressing oil prices already at four-year lows.

The U.S. fracking industry, which has become the primary driver of domestic oil production over the past two decades, faces a potentially significant challenge. In 2023, shale oil accounted for 64% of total U.S. crude oil production, with the nation averaging 13.6 million barrels per day (BPD), making it the world's largest crude-oil producer. However, U.S. companies are anticipating their first production drop in four years in 2026.

Former U.S. President Donald Trump has stated that U.S. companies will invest billions in Venezuelan oil production. The prospect of revitalizing Venezuela's oil industry, which has suffered from years of mismanagement and underinvestment under Maduro's socialist regime, raises concerns about increased global supply.

Venezuela, a founding member of the Organization of the Petroleum Exporting Countries (OPEC), possesses the world's largest proven oil reserves. However, its production has plummeted from over 3 million BPD in the late 1990s to less than 1 million BPD in recent years. This decline has been attributed to a combination of factors, including corruption, lack of maintenance, and U.S. sanctions imposed in response to Maduro's authoritarian rule.

The potential return of Venezuelan oil to the global market could have significant implications for OPEC's efforts to manage supply and support prices. Saudi Arabia, the de facto leader of OPEC, has been working to coordinate production cuts with other members and non-OPEC producers, such as Russia, to balance the market. An influx of Venezuelan oil could undermine these efforts and lead to renewed price wars.

Analysts suggest that the long-term impact of the U.S. intervention in Venezuela will depend on several factors, including the speed and effectiveness of efforts to rebuild the country's oil infrastructure, the level of U.S. investment, and the political stability of the post-Maduro government. The situation remains fluid, and the future of Venezuelan oil production, and its impact on global markets, remains uncertain.