Venezuela holds an estimated 18–19% of global proven oil reserves, the largest in the world; however, the majority of these reserves are heavy and extra-heavy crude, which are costly and complex to process, limiting their effective contribution to global supply. Separately, Venezuela currently accounts for only around 0.8% of global oil consumption, making its near-term impact on physical oil markets relatively modest. While U.S. President Donald Trump has publicly framed any U.S. action as being driven by anti-drug enforcement objectives, market participants largely view the situation through a geoeconomic and geopolitical lens, centred on energy resources and Venezuela’s deepening economic ties with China and Russia, alongside the U.S.’s own refining capacity to process heavy crude. The situation is further complicated by China’s exposure, with roughly 5% of its crude oil imports sourced from Venezuela, raising the risk of worsening US-China ties amid an already fragile and evolving global geopolitical backdrop.
Oil Price Impact: Neutral with upside bias given higher risk premium (short term) to Slightly Lower (long term given potential higher supply) – Venezuela currently contributes less than 1% to global oil supply, so any additional disruption beyond existing mismanagement and sanctions is unlikely to drive sustained price increases in the near term. Meanwhile, a potential easing of sanctions could boost Venezuelan exports, adding further supply to the market. Lower oil prices could benefit emerging markets, including ASEAN, and may also support President Trump politically ahead of the US midterm elections through lower petrol costs—though the effect is less positive for net oil exporters like Malaysia and Vietnam.
Action:
As we move through 2026, global equities are expected to post moderate gains, supported by solid earnings growth, though valuation concerns persist. For investors, geopolitical developments, AI-related capital expenditure monetisation, and concentration risks are key factors. The current Fed rate-cut cycle should support equities, with Asian markets potentially able to ease further given elevated real rates. In this environment, we recommend a barbell strategy focused on quality growth and income to navigate potential volatility. Separately, defensive and value-oriented assets with stable earnings and resilient cash flows, along with commodities-linked assets like gold, are likely to benefit amid heightened geopolitical uncertainty.
Disclaimer
The information contained herein does not constitute an offer, invitation, or solicitation to invest in any product or service offered by Phillip Capital Management Sdn Bhd (“PCM”). No part of this document may be reproduced or circulated without prior written consent from PCM. This is not a unit trust or collective investment scheme and is not an obligation of, deposit in, or guaranteed by PCM. All investments carry risks, including the potential loss of principal.
Performance figures presented may reflect model portfolios and may differ from actual client accounts’ performance. Variations in individual clients’ portfolios against model portfolios and between one client’s portfolio to another can arise due to multiple factors, including (but not limited to) higher relative brokerage costs for smaller portfolios, timing of capital injections or withdrawals, timing of purchases and sales, and mandate change (e.g., Shariah vs. conventional). These differences may impact overall performance.
Past performance is not necessarily indicative of future returns. The value of investments may rise or fall, and returns are not guaranteed. PCM has not considered your investment objectives, financial situation, or particular needs. You are advised to consult a licensed financial adviser before making any investment decisions.
While all reasonable care has been taken to ensure the accuracy and completeness of the information contained herein, no representation or warranty is made, and no liability is accepted for any loss arising directly or indirectly from reliance on this material. This publication has not been reviewed by the Securities Commission Malaysia.
