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The 'War Economy' Trade: Global Defense Spending Surges as Geopolitical Fractures Widen

Oil Slides as Venezuelan Tensions Cool; Majors Balk at Trump's Energy Ambitions

WikiFX

| 5h

Abstract：Brent crude prices have slipped below $62 as geopolitical tensions in Venezuela ease following the cancellation of a second US military strike. Meanwhile, US oil majors are rebuffing the administration's push to re-enter the Venezuelan energy sector, citing immense legal and security risks.

Global oil markets exhaled on Friday, with Brent Crude dipping below $62 per barrel and WTI breaking under $58. The bearish turn follows President Trumps announcement that a planned second wave of military strikes against Venezuela has been cancelled, signaling a shift to diplomatic maneuvering. Traders are now refocusing on the looming specter of oversupply in 2026.

The $100 Billion Reconstruction Myth

Behind the headlines, a significant rift is forming between the White House and America's energy giants. The administration has lobbied US oil majors, including ExxonMobil and Chevron, to re-enter Venezuela and spearhead a $100 billion reconstruction of its degraded oil infrastructure. However, executives are balking at the structural obstacles:

Security Vacuum: With the Venezuelan military entrenched in state oil company PDVSA, and infrastructure theft rampant, companies fear for asset safety.

Legal & Fiscal Quagmire: The regime demands up to 90% of profits ( 30% royalties plus 60% corporate tax). Additionally, debts to companies like ConocoPhillips and Exxon from 2007 remain unpaid.

Time Horizon: Experts at Rystad Energy estimate that restoring output would take until 2030 and require sustained investment beyond the current administration's political term.

No Law, No Investment

“Oil companies will not be pressured into high-risk capital allocation by political mandates,” noted Dan Pickering, founder of Pickering Energy Partners. Without a stable legal framework, the vision of using Venezuelan crude to stabilize prices appears disconnected from reality.

Energy Secretary Chris Wright acknowledged that rebuilding confidence is “a gradual process.” For now, US majors remain on the sidelines, stripping the administration's energy diplomacy of its critical economic lever.

Disclaimer:

The views in this article only represent the author's personal views, and do not constitute investment advice on this platform. This platform does not guarantee the accuracy, completeness and timeliness of the information in the article, and will not be liable for any loss caused by the use of or reliance on the information in the article.