The dramatic events in Venezuela over the weekend have once again drawn global attention to a country that, in theory, should be one of the world’s leading energy powers. Venezuela holds the largest proven oil reserves on the planet, yet its oil sector has suffered a long-term decline for more than two decades. Understanding why requires looking beyond headlines and examining the technical, legal, and political decisions that gradually undermined what was once a central pillar of the global oil system.

The United States confirmed that Venezuelan President Nicolas Maduro is now in US custody following a military operation carried out inside Venezuelan territory. President Donald Trump announced the operation publicly, while Vice President J.D. Vance said the US administration had offered “several possible exits,” but insisted on two non-negotiable conditions: an end to drug trafficking and the return of what he described as “stolen oil” to the United States.

That final phrase — stolen oil — points to a long-running and deeply consequential dispute over Venezuela’s oil sector. It helps explain why a country with the world’s largest oil reserves has endured more than a decade of economic collapse, and why oil remains central to its geopolitical relevance.

The world’s largest oil reserves — on paper only

According to data from the US Energy Information Administration, Venezuela holds around 303 billion barrels of proven crude oil reserves, the largest figure globally.

But that headline number obscures a crucial reality: most of Venezuela’s oil is extra-heavy crude, concentrated in the Orinoco Belt. Unlike the light, low-sulfur oil produced in regions such as the US Permian Basin, Orinoco crude is dense, viscous, and difficult to transport. Producing it at scale requires heating, dilution with lighter hydrocarbons, and processing in specialized facilities before it becomes refinery-ready. This additional layer of complexity means production is only economically viable when oil prices are high.

For decades, Venezuela relied on partnerships with US and European oil companies to provide the technology, capital, and operational expertise needed to sustain this complex system. Those partnerships, however, did not survive the early 2000s.

Expropriation and the unraveling of PDVSA

Although Venezuela formally nationalized its oil industry in the 1970s, it moved beyond conventional state ownership in the early 2000s under President Hugo Chávez, launching a wave of expropriations that fundamentally reshaped the sector.

Foreign companies were forced into minority positions alongside the state oil company PDVSA, or had their assets fully expropriated. Major US firms, including Exxon Mobil and ConocoPhillips, ultimately exited the country and pursued international arbitration after losing assets without compensation.

International courts and arbitration panels later awarded these companies billions of dollars in damages — rulings that Venezuela largely failed to honor. This is the legal backdrop behind the “stolen oil” narrative that has resurfaced in US political rhetoric.

The consequences for Venezuela’s oil industry were severe. PDVSA lost foreign financing and technical support, skilled engineers left the country, refineries and pipelines deteriorated, and production fell steadily — from more than 3 million barrels per day before the expropriations to well under 1 million barrels per day in recent years.

By the time Maduro took office in 2013, the oil sector was already in structural decline. Corruption, mismanagement, and later US sanctions under his presidency further constrained output and exports.

Why heavy oil depends on foreign expertise

Sustaining heavy oil production requires continuous reinvestment, reliable electricity supply, and consistent access to diluents — many of which historically came from the US Gulf Coast. Without these inputs, and without sufficiently high oil prices, production systems deteriorate rapidly.

When foreign partners withdrew from Venezuela, PDVSA lost the capacity to maintain this complex ecosystem. Steam injection operations were shut down, upgrading capacity eroded, and fields requiring constant maintenance were left idle. Even when global oil prices recovered, Venezuela was unable to respond.

This is the core paradox of Venezuela’s energy crisis: a country with the world’s largest oil reserves lacks the operational capability to convert those reserves into stable production without external support.

Oil, sanctions, and the US perspective

US officials have long argued that Venezuela’s oil sector became intertwined with sanctions evasion, shadow shipping networks, and criminal activity. In recent years, Venezuelan oil has increasingly been exported through intermediaries and foreign buyers operating under sanctions pressure.

Vice President Vance’s remarks reflect the US administration’s view that oil revenues were central not only to Venezuela’s economy, but also to Maduro’s ability to remain in power despite international isolation. Whether or not one agrees with that framing, it underscores why energy issues remain inseparable from US–Venezuela relations.

What comes next for Venezuela’s oil sector?

With reports that Maduro is now in US custody, the future of Venezuela’s oil industry enters a period of deep uncertainty. Several scenarios are possible.

A transitional government could seek to re-engage foreign oil companies, reopen arbitration cases, and rebuild contractual frameworks to attract investment. US firms with outstanding claims may pursue compensation or reentry under new agreements. China and Russia, both of which hold significant oil-related interests backed by guarantees in Venezuela, are also likely to move to protect their positions.

What appears unlikely is a rapid recovery. Even under favorable political conditions, restoring Venezuelan oil production would take many years. Processing units must be rebuilt, infrastructure modernized, and human capital restored. Heavy oil does not recover quickly — especially in a low-price environment.

Conclusion

Maduro’s detention represents a major geopolitical escalation, but the underlying story is not new. Venezuela’s crisis did not begin with sanctions or military action. It began when a technically complex oil sector was stripped of the partnerships and investment it could not function without.

Venezuela’s oil reserves remain vast and real, but reserves alone do not create prosperity. Without technology, capital, expertise, and sufficiently high prices, oil remains trapped underground. That reality has shaped Venezuela’s economic collapse, its international disputes, and the central role oil continues to play in today’s unfolding events.

Copper prices fell during Thursday’s trading despite positive long-term demand expectations for the industrial metal, as prices came under pressure from profit-taking.

Consultancy S&P Global said on Thursday that rapid growth in the artificial intelligence and defense sectors will drive global copper demand up by 50% by 2040. However, supply is expected to fall short of demand by more than 10 million metric tons per year unless recycling and mining activity is expanded.

Copper has long been widely used across construction, transportation, technology, and electronics, given its high electrical conductivity, corrosion resistance, and ease of shaping and manufacturing.

While the electric vehicle industry boosted copper demand over the past decade, the AI, defense, and robotics industries are expected to require significantly larger volumes of the metal over the next 14 years, alongside traditional consumer demand for air conditioners and other copper-intensive appliances, according to the report.

S&P Global estimates global copper demand will reach 42 million metric tons per year by 2040, up from about 28 million metric tons in 2025. Without new supply sources, roughly a quarter of that demand is likely to go unmet.

Dan Yergin, vice chairman of S&P Global and a co-author of the report, said: “The fundamental driver behind this demand is the electrification of the world, and copper is the metal of electrification.”

Artificial intelligence is one of the fastest-growing sources of copper demand, with more than 100 new data center projects launched last year, carrying a combined value of nearly $61 billion.

The report also noted that the war in Ukraine, along with moves by countries such as Japan and Germany to increase defense spending, is likely to further support copper demand.

Carlos Pascual, vice chairman of S&P Global and former US ambassador to Ukraine, said: “Demand for copper in the defense sector is almost completely inelastic.”

Nearly every electronic device contains copper. Chile and Peru are the world’s two largest copper producers, while China is the largest copper smelter. The United States, which has imposed tariffs on some copper products, imports about half of its annual copper needs.

The report does not factor in potential supply from deep-sea mining.

S&P published a similar report in 2022 that projected copper demand under a scenario in which the world reaches carbon neutrality by 2050, the so-called “net zero” target.

The report released on Thursday uses a different methodology, projecting copper demand based on a baseline scenario that assumes demand growth continues regardless of government climate policies.

“Energy transition policies have changed dramatically,” Yergin said.

In trading, March copper futures were down by $5.73 per pound at 14:47 GMT.

Bitcoin fell during Asian trading on Thursday, extending the reversal of the recovery seen at the start of the year, as risk appetite remained constrained amid rising geopolitical risks in Latin America and Asia.

Caution ahead of the release of US nonfarm payrolls data also limited investor appetite for large bets in cryptocurrency markets, with investors preferring to wait for clearer signals on the performance of the world’s largest economy.

Bitcoin declined by 1.5% to $91,093.8 by 00:06 ET (05:06 GMT), after touching an intraday low of $90,642.7 earlier in the session. The world’s largest cryptocurrency’s early-year recovery stalled after it largely failed to reclaim the $95,000 level.

Pressure on the crypto market also increased due to uncertainty surrounding digital asset treasury companies, particularly Strategy Inc, the largest institutional holder of Bitcoin. The company, which is down nearly 50% since the start of 2025, received only limited support after MSCI announced it would not proceed with a proposal to exclude digital asset treasury companies from its indices.

However, the index provider said it would move ahead with a broader review of listing requirements for companies within its indices.

Bitcoin recovery falters amid rising geopolitical risks

Risk appetite toward crypto-linked assets remained constrained by escalating geopolitical tensions in Asia and Latin America.

In Asia, a long-running diplomatic dispute between China and Japan intensified this week after Beijing imposed export restrictions on Tokyo and launched an anti-dumping investigation targeting Japanese chemical companies.

Chinese media also raised the possibility that Beijing could restrict key rare earth exports to Japan, a scenario that would carry serious implications for Japan’s large manufacturing sector.

The diplomatic dispute traces back to comments made by Japanese Prime Minister Sanae Takaichi in late 2025 regarding military intervention in Taiwan, which drew strong criticism and rejection from Beijing.

In Latin America, markets continued to monitor developments surrounding the US intervention in Venezuela, which resulted in the arrest of President Nicolas Maduro.

Reports indicated that US President Donald Trump is preparing to impose long-term control over Venezuela’s oil sector, a move that could anger China and fuel further political instability in the region.

The US intervention in Venezuela over the weekend had shaken financial markets earlier this week, boosting demand for safe havens such as gold and the dollar, while Bitcoin largely lagged behind that trend.

Cryptocurrency prices today: altcoins retreat alongside Bitcoin ahead of US jobs data

Other cryptocurrencies broadly declined in tandem with Bitcoin, giving up a large portion of their early-year gains.

Caution increased ahead of the release of US nonfarm payrolls data for December on Friday, which is widely expected to influence Federal Reserve rate expectations, amid growing bets that the central bank will keep interest rates unchanged in the near term.

Ether, the world’s second-largest cryptocurrency, fell 2.8% to $3,156.15, while XRP, one of this week’s stronger performers, dropped by 4%.

Oil prices rose on Thursday after two consecutive sessions of declines, as investors assessed developments related to Venezuela and reports of progress on proposed US legislation to impose sanctions on countries trading with Russia.

Brent crude futures climbed by 59 cents, or 0.98%, to $60.55 per barrel by 10:38 GMT, while US West Texas Intermediate crude rose 58 cents, or 1%, to $56.57 per barrel.

Tamas Varga, an analyst at PVM, said the price rebound was driven by President Donald Trump allowing the Russia sanctions bill to advance, raising concerns over further disruptions to Russian oil exports.

Republican Senator Lindsey Graham said on Wednesday that Trump had given the green light to the legislation, adding that the bill could be brought to a vote as early as next week.

Both benchmark crudes had fallen more than 1% for a second straight session on Wednesday, as market participants continued to price in ample global supply this year. Morgan Stanley analysts expect the oil market to face a surplus of up to 3 million barrels per day in the first half of 2026.

Data from the US Energy Information Administration showed on Wednesday that US gasoline and distillate inventories rose by more than expected in the week ended January 2, while crude oil inventories declined.

Washington announced on Tuesday that it had reached an agreement with Caracas granting access to Venezuelan oil worth up to $2 billion. Sources said the deal could initially require redirecting shipments that had been destined for China.

The sources added that independent Chinese refiners, which account for a significant share of China’s Venezuelan oil imports, may turn to Iranian crude to offset any potential shortfall.

In a related development, the United States seized two oil tankers linked to Venezuela in the Atlantic Ocean on Wednesday, one of which was flying a Russian flag, as part of an escalating effort by President Donald Trump to control oil flows in the Americas and pressure Venezuela’s socialist government to realign with Washington.