FX.co ★ BofA flags policy pivot as US seeks operational control of Venezuela’s oil, raising debt concerns

Bank of America (BofA) detected a major shift in US foreign policy stance in light of Washington’s plans to take operational control of Venezuela’s oil reserves, estimated at 65 billion barrels. As BofA analyst Anne Milne notes, the initiative is unfolding against the backdrop of a sharp slowdown in the development of Venezuela’s oil and gas sector. Referring to BofA sources, the US government expects to sign a 25-year agreement covering 17 oil fields through a partnership between the US Department of Defense and NABEP, a structure linked to Venezuelan businessman Alejandro Betancourt. The project is intended to attract up to $100 billion in investment and to secure for the United States 55% of the effective production volume of the new company, with a target of exceeding 1.5 million barrels per day.

Against the announced parameters, BofA kept its target forecast for Venezuelan oil production at 1.6 million barrels per day but pushed back the timing of that output from the end of 2027 to 2028, stressing that the market will need time to adapt to the new institutional framework. At the same time, the bank judged the agreement’s impact on prospects for resolving Venezuela’s sovereign default to be highly ambiguous. While an inflow of investment could revive stagnant sectors, the actual volume of budget revenue available to Caracas remains unclear, and the proposed model has not yet been tested in practice. Moreover, the established domestic creditors face the risk of their ratings being downgraded if Washington channels financial flows into rebuilding infrastructure under its own control. Additional obstacles include the high cost of extracting heavy oil in the Orinoco basin and the need to sell it at a large price discount.