Venezuela's oil outlook is modest despite tailwinds

Significance

Higher oil prices, enhanced sanctions evasion and imported Iranian 'diluents' (liquids used to dilute heavy crude) allowed for a resurgence of Venezuelan oil exports and production in 2021, to nearly double the lowest levels reached in mid-2020. The second half of 2021 brought the first projected GDP growth since 2013, while inflation reached its lowest level since 2017.

Impacts

• It is uncertain that Russian and Chinese investment will resume sufficiently to boost oil output.
• The improving economy will solidify the president’s hold on power and strengthen his negotiating position in talks with the opposition.
• There are still incentives for Maduro to negotiate sanctions relief to take advantage of the oil market rebound and attract investment.