Can Venezuela's Oil Get Trump to His $50 Price Target?

Washington is eyeing Venezuela's massive oil reserves as a potential tool to drive down global crude prices, with President Donald Trump targeting a price of $50 per barrel. According to analysts at BCA Research, gaining control over Venezuelan supply could be the channel to achieve that goal, but the path is filled with significant economic and logistical obstacles.

The push to lower crude prices comes as the Trump administration looks to address affordability concerns for American voters ahead of the upcoming midterm elections. West Texas Intermediate (WTI) crude has been trading around $58 per barrel.

Following a strike that led to the capture and removal of Venezuelan leader Nicolas Maduro, President Trump has stated that the U.S. will seek to control the country's oil, potentially indefinitely.

The Venezuelan Playbook for Cheaper Oil

Venezuela holds roughly one-fifth of the world's proven oil reserves. However, its production has been crippled by a decaying domestic infrastructure and years of U.S. sanctions on its oil exports.

Earlier this week, President Trump announced that Caracas had agreed to ship as much as 50 million barrels of oil to the United States. Despite this, the Financial Times reports that major oil companies are demanding "serious guarantees" before committing the massive investments needed to revitalize Venezuela's energy sector. The heads of several large oil firms are scheduled to meet with Trump on Friday to discuss the matter.

Why the $50 Target Faces Major Hurdles

While tapping Venezuelan oil seems straightforward, BCA Research analysts highlight several critical challenges that make Trump's $50-per-barrel goal "problematic" and potentially unsustainable.

The U.S. Shale Problem

A sustained oil price of $50 per barrel would directly threaten the profitability of the U.S. shale industry. The breakeven price—the point where revenue equals cost—for new shale wells is estimated to be around $64 a barrel. Pushing prices far below this level could stifle domestic production, creating a conflict with a key sector of the American economy.

OPEC and Infrastructure Roadblocks

The success of this strategy also depends on factors far outside of Washington's control. BCA analysts note that the plan is "unlikely to be sustainable" unless the Organization of the Petroleum Exporting Countries (OPEC) is willing to accept lower margins and higher deficits. Venezuela is a member of OPEC, while the U.S. is not.

"Controlling oil prices ultimately depends on willingness to act as the swing producer, not just the size of reserves or production under control," the analysts argued. "U.S. shale producers cannot and will not coordinate the way OPEC does."

Furthermore, there are practical limits to how quickly Venezuelan production can be revived after years of infrastructural decay. The actual degree of control that Venezuela will grant the U.S. over its most valuable natural resource also remains a major question.

The Broader Economic Outlook

Despite the obstacles facing the administration's specific strategy, BCA analysts still anticipate that oil prices will trend lower. However, they attribute this forecast to broader economic fundamentals rather than a potential surge in U.S.-controlled Venezuelan output.