US incursion into Venezuela revives oil risk premium, Dalal Street braces for crude-led swings on Monday

Oil prices have returned to the center of market attention after the United States captured Venezuelan President Nicolas Maduro over the weekend, a development that has already shifted sentiment in global crude markets and is likely to shape how Indian stocks, the rupee and energy stocks trade when markets open on Monday.The U.S. move has injected new geopolitical risk into oil prices even as traders consider the longer-term possibility that Venezuelan supply could return under U.S. supervision, analysts said.

The Venezuelan president’s arrest has reintroduced a geopolitical risk premium to oil markets, even as prices remain under pressure after a sharp decline last year. Oil prices fell by more than 18% in 2025, the sharpest annual decline since 2020, amid growing concerns about global oversupply.The development comes as OPEC+ meets on Sunday, with the group widely expected to keep production steady despite political tensions between key members Saudi Arabia and the UAE and US action in Venezuela, OPEC+ delegates told Reuters.

The eight OPEC+ producers – Saudi Arabia, Russia, the UAE, Kazakhstan, Kuwait, Iraq, Algeria and Oman – pump about half of the world’s oil. They increased production targets by about 2.9 million barrels per day from April to December 2025, equivalent to almost 3% of global demand, before agreeing in November to suspend further increases for January, February and March. Sunday’s meeting is unlikely to change that policy, three OPEC+ sources told Reuters.

Venezuela has the world’s largest proven oil reserves, with about 303 billion barrels – more than Saudi Arabia – but production has collapsed due to years of mismanagement, underinvestment and sanctions, Reuters noted.

Analysts told PTI that while an immediate jump in Venezuelan production is unlikely given the decaying infrastructure and unresolved legal issues, a US-led overhaul of the sector could ultimately increase supply in global markets and act as a stabilizing force on prices.What raw volatility means for the Indian markets

For Indian markets, the immediate impact will be felt through oil prices.

India imports over 85% of its crude oil needs, making domestic markets highly sensitive to sharp movements in global prices. Higher oil prices would weigh on the rupee, fuel inflation concerns and pressure interest rate expectations, while supporting upstream producers and hurting oil marketing companies, analysts told PTI.

Conversely, expectations of Venezuelan supply returning to global markets over time could limit the upward trend in oil prices, providing relief for Indian refiners and fuel consumers.

Indian refineries such as Reliance Industries, Nayara Energy, Indian Oil Corporation, HPCL-Mittal Energy and Mangalore Refinery have the complexity required to efficiently process Venezuelan heavy crude oil.

State-owned ONGC Videsh Ltd (OVL) is also in the spotlight. OVL jointly operates the San Cristobal oil field in eastern Venezuela, but according to PTI, production has fallen to 5,000 to 10,000 barrels per day due to sanctions. Venezuela has failed to pay OVL $536 million in dividends due on its 40% stake in the field until 2014, with an almost equivalent amount pending for subsequent years.

Once sanctions are eased, OVL could revive production to 80,000-1,00,000 barrels per day through additional wells and upgraded equipment, and potentially recover nearly $1 billion in past contributions from export revenues, officials and analysts told PTI.

Strategic advantage for India, short-term caution

Analysts quoted by PTI said a US-led restructuring of Venezuela’s oil sector – which would bring capital, technology and operational discipline – could significantly increase production within a year, increasing supply in global markets and reshaping crude trade flows.

For India, renewed Venezuelan exports would provide a strategic alternative to Middle Eastern crude, reduce its exposure to geopolitical shocks and strengthen its influence over price negotiations.

For now, however, Indian markets are likely to rely on raw price movements when trading resumes on Monday, with oil-driven volatility – rather than immediate supply gains – set to set the tone, analysts said.

(Disclaimer: Recommendations, suggestions, views and opinions expressed by the experts are their own. These do not represent the views of The Economic Times)