Fitch Ratings has released a new report highlighting the dynamics of the global energy market, asserting that the global oil supply surplus is playing a crucial role in offsetting the uncertainty surrounding production levels in both Iran and Venezuela. This report comes at a time of heightened market anticipation due to geopolitical tensions, which typically lead to sharp price spikes.
The effect of the surplus on the risk premium
In its economic analysis, the agency explained that the geopolitical risk premium for oil—the additional amount buyers pay in anticipation of supply disruptions—is likely to remain limited. This is primarily due to a comfortable supply surplus in the global market, supported by increased production from non-OPEC countries and ample strategic reserves in major consuming nations. Despite occasional price fluctuations in Brent and West Texas Intermediate crude, Fitch expects the market to remain oversupplied until 2026, providing a buffer against sudden shocks.
Geopolitical context: Iran and Venezuela
These assurances take on particular significance when considering the historical and political background of the countries in question. Both Iran and Venezuela possess enormous oil reserves, yet their oil sectors have suffered for years due to stringent economic sanctions, a lack of infrastructure investment, and political instability. Historically, any threat to the supplies from these two countries would have been enough to cause market turmoil, but the changing global energy landscape and the diversification of production sources have reduced this direct impact.
Developments in the Venezuelan situation and US deals
Regarding developments in Venezuela's oil sector, a US official revealed last week that the United States had finalized its first sale of Venezuelan oil, valued at $500 million. The official added that further similar deals are expected in the coming days and weeks, reflecting a shift in the management of Venezuela's oil resources.
In a related development, US President Donald Trump announced new arrangements with the interim authorities in Venezuela, revealing that between 30 and 50 million barrels of oil would be delivered to the United States. These steps follow political changes and US interventions aimed at altering the power structure and removing Nicolás Maduro, paving the way for a restructuring of Venezuelan oil exports and their redirection toward US markets.
