Oil markets steady as analysts say excess supply, not politics, is driving prices
Dubai: UAE drivers are unlikely to face an immediate increase in petrol or diesel prices despite ongoing political unrest in Venezuela. Analysts say global oil markets remain well supplied, which is helping absorb geopolitical shocks and keeping fuel prices stable.
Vijay Valecha, Chief Investment Officer at Century Financial, explained that geopolitical events usually cause brief market reactions rather than long-term price hikes. “Oil often carries a risk premium during political tensions, but this is typically driven by sentiment and fades quickly,” he said. “Right now, global supply is already in surplus, so traders are more focused on oversupply risks than headlines.”
Why UAE Fuel Prices Remain Stable
Fuel prices in the UAE are determined by a pricing committee that considers international crude benchmarks, refined fuel costs, transportation and distribution expenses, and currency movements. Retail prices are calculated based on the monthly average of these factors.
According to Valecha, the disruption in Venezuela has not significantly affected price signals. “Brent crude has remained technically stable since Monday, indicating no major pressure on UAE pump prices so far,” he said. “If geopolitical risks continue, the longer-term impact could even be downward, as the market balance still favors surplus supply.”
This explains why oil has avoided sharp spikes seen during past geopolitical crises, when prices jumped as much as 7% in early trading. In contrast, WTI crude gained less than 2% on January 5 before giving up those gains the following day.
Recent reports also suggest that former US President Donald Trump may release 30–50 million barrels of crude into global markets. While Venezuela’s production recovery will take time, releasing stored barrels and preventing well shutdowns could support future supply levels.
Venezuela’s Limited Role in Global Supply
Despite holding the world’s largest proven oil reserves, Venezuela currently accounts for less than 1% of global oil production. Output has dropped sharply following US sanctions and tanker blockades, falling from about 1.1 million barrels per day late last year to under 500,000 barrels per day.
Ole Hansen, Head of Commodity Strategy at Saxo Bank, said this significantly limits Venezuela’s influence on oil markets. “At current production levels, Venezuela is unlikely to have any meaningful impact on OPEC,” he noted. “Reviving the sector would require investments of around $180 billion and could take decades.”
Hansen added that even if Venezuelan supply eventually increases, low-cost producers such as Saudi Arabia are unlikely to be affected. “Additional supply could actually help prevent future price spikes once the current glut fades,” he said, warning that excessively high prices tend to accelerate the shift toward alternative energy sources.
In the near term, analysts do not expect a meaningful rise in Venezuelan oil output due to high investment needs and ongoing political instability. Over the longer term, however, its underdeveloped oil—and eventually gas—reserves may increasingly flow toward the US market.
Broader Changes in Global Oil Trade
The situation also highlights deeper shifts in global energy flows. Lombard Odier expects US production to focus more on domestic demand, OPEC+ to supply China, and Europe to rely on a mix of Middle Eastern and Atlantic Basin sources.
At the same time, security risks to energy infrastructure may be underestimated as regional conflicts increase. “Greater regional intervention raises risks for transport and energy assets,” said Hechler-Fayd’herbe, adding that defence spending is likely to remain structurally elevated.
For now, UAE motorists remain protected from sharp fuel price swings. Oil markets are focused on surplus supply, slow demand growth, and OPEC+ production discipline rather than disruptions in a single country. Unless the crisis escalates significantly or affects major supply routes, analysts say UAE fuel prices are more likely to track global demand trends than geopolitical developments.
Editor-at-Large
A passionate writer in the lubricant industry, Awais Iqbal has been covering oils, greases, and industrial fluids since the start of his career. At 25, he’s already written for blogs, catalogs, and brand guides across the UAE. Awais’s insights help companies connect with their audience, and his clear, helpful writing style is trusted by brands in the region.
