Venezuela, once a significant supplier of crude oil to the United States, may be on the brink of losing its position as a key energy partner. 

Hinting at the reversal of limited oil imports resumed in 2023, US President Donald Trump has indicated that his administration will "probably" halt purchases of Venezuelan crude, a move set to reshape bilateral trade in the sector as global oil prices edge lower.

This follows Trump’s sweeping 2019 sanctions against Venezuela’s oil market, imposed during his first term as part of a "maximum pressure" strategy to oust Nicolás Maduro, whom the US and several other nations do not recognise as a legitimate leader.

In his first days back in office last week, the newly inaugurated president remarked that the US "no longer needs Venezuelan oil," reaffirming his position on the matter. 

These statements seem to quell rumours of potential collaboration with the Maduro regime in exchange for migrant repatriation and point to a re-evaluation of oil export licences, which had allowed companies like Chevron and others from Europe and Asia to resume production and exports of Venezuelan crude since the short-lived easing of sanctions under former President Joe Biden.

The return of Venezuelan crude to the US refineries in recent years came after Biden's six-month sanctions relief granted in late 2023 to encourage dialogue between Maduro’s government and the opposition. But most restrictions were rolled back last April after Washington accused Maduro of not making good on his promises to organise free and fair elections later in July. Despite this, the Treasury began issuing ad-hoc licences to select oil companies, such as France's Maurel et Prom, Spain's Repsol and India's Reliance, allowing them to continue operations in the country.

Maduro, who began his contested third term earlier this month, has long faced accusations of electoral fraud and serious human rights violations.

Marco Rubio, Trump's pick for US Secretary of State and a vocal critic of Chavismo, has urged a review of oil licences, suggesting that US companies such as Chevron – which operates a slew of joint ventures with state-run refiner PDVSA – have been inadvertently funding Maduro's regime, despite promises of political reform. 

He recently held a virtual meeting with Venezuelan opposition leaders María Corina Machado and Edmundo González Urrutia, who claim victory in the disputed July 28 presidential election, and labelled Maduro’s government as a “drug trafficking organisation" during a Senate hearing last week.

Maduro, along with his officials, has argued that Venezuela's economy can function despite international "unilateral sanctions," which he refers to as a "blockade" that cost his country $642bn over the past five years.

The South American nation, home to the world's largest proven crude reserves, currently ranks as the third-largest oil exporter to the US, following Canada and Mexico, although its production has drastically declined since its peak years.

Venezuela’s crude, primarily the Merey blend, has faced quality issues, including excessive sulphur content, which resulted in discounted sales. The oil’s heavy, viscous nature, coupled with high acidity, makes it difficult for many refineries to process. 

Some experts argue that US companies may prefer alternatives primarily due to these refining challenges. In fact, the US currently imports only a small portion of its crude from Venezuela, with Chevron’s contribution accounting for just 1% of US oil consumption, according to industry estimates.

As global oil markets face an oversupply forecast for 2024, with projections of an additional 500,000 to 1.1mn barrels per day (bpd), prices remain under pressure. Currently, the price of WTI crude hovers around $76 per barrel, while Brent stands at $79. 

Venezuela’s oil production has also seen a notable decline, with output in 2024 reaching 921,000 bpd, a 17.6% increase from the previous year, according to OPEC figures. 

This is a far cry from the 2mn bpd produced in the early 2000s, signalling the continuing decline of one of the world's once-largest oil exporters, whose ailing infrastructure suffers from severe underinvestment due to decades of corruption, sanctions and mismanagement.