The Venezuela Oil Paradox: Why ASX Energy Stocks May Not Rally as Expected

ASX Energy Stocks remain flat following the Venezuela crisis

When US forces captured Venezuelan President Maduro over the weekend, many investors expected oil prices to spike and energy stocks to rally. After all, turmoil in a country sitting on the world’s largest oil reserves should mean supply fears and higher prices. But the market is doing the opposite of what most people expected.

Woodside Energy (ASX: WDS) is up 0.8% since Friday. Santos (ASX: STO) has edged 0.3% higher. Beach Energy (ASX: BPT) has dipped 0.4%, while Karoon Energy (ASX: KAR) is flat. None of the moves you’d expect from major geopolitical news. Meanwhile, Brent crude has barely moved, sitting around US$60-61 per barrel.
So what’s going on? The answer reveals why this situation is more complicated than it first appears.

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Why Venezuela Means More Oil, Not Less

Here’s the key point most investors are missing: Venezuela’s problems aren’t about supply disappearing. They’re about the supply potentially coming back.

Venezuela sits on the world’s largest oil reserves at 303 billion barrels. That’s more than Saudi Arabia. But years of mismanagement and US sanctions have crushed production from 3.5 million barrels per day in the late 1990s to less than one million today. That’s barely 1% of the global supply.

With Maduro gone, the picture could change dramatically. Analysts at MST Financial believe Venezuelan exports could reach 3 million barrels per day in the medium term if foreign investment returns. Some forecasts put production at 4-5 million barrels per day by 2030.

This is the paradox. Rather than worrying about supply disruptions, the market is pricing in a future where millions of extra barrels flood an already oversupplied market. Brent crude fell nearly 20% through 2025, and more Venezuelan oil would only add to that pressure.

What This Means for ASX Energy Stocks

Woodside remains Australia’s biggest oil and gas producer. At around A$23.52 per share, it offers a dividend yield of approximately 7%, though future franking levels remain a key watch point. That’s attractive for income investors, and the diversified LNG business provides some protection. The company’s long-term contracts give it more stability than pure oil plays. But we think the stock looks fairly priced rather than cheap, given the murky outlook for oil prices.

Santos trades at A$6.10 with a yield of nearly 6%. The stock has already fallen more than 20% over six months after a failed takeover bid from ADNOC and ongoing regulatory troubles. Most brokers see 20-40% upside from current levels, but there’s more balance sheet risk here than with Woodside.

Beach Energy at A$1.14 and Karoon Energy at A$1.51 offer bigger potential gains if oil prices rise. But they also carry more risk if prices stay weak. Smaller producers have less room to absorb a prolonged downturn, and their share prices tend to move more sharply in either direction.

The Investor’s Takeaway

We believe patience is the smarter play here. The rush to buy energy stocks on geopolitical news often backfires when the longer-term picture becomes clear.

For income seekers, Woodside’s 7% yield offers decent protection while you wait. Santos has better value but higher risk. Growth investors might want to hold off entirely. If Venezuelan production does ramp up over the next few years, ASX energy stocks could face more headwinds before they find a floor.

Sometimes the best trade is the one you don’t make.