The oil industry's boom-bust cycle is self-perpetuating. Low prices cause companies to slash investment and lead to a talent drain as workers leave the volatile sector. This underinvestment, combined with natural production declines, inevitably leads to tighter markets and price spikes years later.

The prospect of reviving Venezuela's vast but dormant oil industry introduces significant potential for increased global supply. Morgan Stanley suggests this could suppress prices in the medium-term, a counter-intuitive outcome where resolving geopolitical tension leads to lower commodity prices rather than higher ones.

Despite new US sanctions on Russian oil producers, Goldman Sachs remains bearish, forecasting a decline. They argue that spare capacity from OPEC, exemptions for buyers, and the reorganization of trade networks will mitigate any supply disruption, preventing a sustained price spike and leading to lower prices by 2026.

Despite healthy global oil demand, J.P. Morgan maintains a bearish outlook because supply is forecast to expand at three times the rate of demand. This oversupply creates such a large market imbalance that prices must fall to enforce production cuts and rebalance the market.

The oil market's lack of reaction to the events in Venezuela demonstrates a key principle: short-to-medium term prices are driven by current production and delivery capacity, not the theoretical size of underground reserves that may take years and billions to develop.

Contrary to bearish sentiment, oil demand has consistently exceeded expectations. The market's weakness stems from a supply glut, primarily from the Americas, which has outpaced demand growth by more than twofold, leading to a structural surplus and significant inventory builds.

A potential price collapse will be averted by the market's own circular logic. Sub-$60 prices will stimulate an extra 500,000 barrels per day of demand from price-sensitive regions while simultaneously forcing high-cost non-OPEC producers to shut down production, creating a natural market equilibrium.

The market has a natural floor. For U.S. shale, a WTI price of $47 represents a zero-return level where drilling and completions halt. For Russia, a Brent price below $42 means operators face negative margins, forcing well shut-ins and providing a backstop against a complete price collapse.

Despite his stated goal of lowering oil prices, President Trump's aggressive sanctions on Venezuela, Iran, and Russia have removed significant supply from the market. This creates logistical bottlenecks and "oil on water" buildups, effectively tightening the market and keeping prices higher than they would be otherwise.