After Venezuela, can Canada's energy sector weather low oil prices?

The initial market reaction to the abduction and indictment of Venezuelan President Maduro by the United States was to run up US energy names and punish Canadian energy. Those moves reflected rhetoric from the US administration which claimed that they would shortly be “running” Venezuela and sending US companies to exploit the country’s vast oil reserves. They also may have reflected a broader trend towards cheaper oil, with West Texas Intermediate (WTI) crude currently trading at below $60 a barrel, having steadily declined in price since the summer of 2025.

Sadiq Adatia, Chief Investment Officer at BMO Global Asset Management, unpacked the immediate reaction to Maduro’s removal on energy markets before tackling the deeper question of how Canadian energy companies can manage a lower oil price. He highlighted some of the potential silver linings for Canadian energy names and outlined how advisors can approach questions about Canadian energy with their clients in 2026.

“The potential of more supply coming out of Venezuela, with oil that is very similar to the oil we have in Canada, puts a lot of pressure on Canadian oil companies,” Adatia says. “The only good side to all that is that it won’t be accessed right away because the infrastructure is not strong there. It will take some time before you see a significant amount of oil coming out of there at this stage… But there is obviously a little bit of negativity as it increases supply, which puts pressure on oil as there is still an excess amount of supply in the marketplace.”

In addition to the infrastructural challenges around accessing Venezuelan oil, Adatia notes that there are political hurdles still to be overcome. Maduro’s Vice President Delcy Rodríguez has been named interim President and there have been reports of armed militias out enforcing the rule of the current regime. There has been little clarity from the United States on how they plan to run Venezuela. The conversion of Venezuela from anti-American pariah into friendly oil supplier will take years, in Adatia’s estimation.

He characterizes the markets’ immediate reaction to Maduro’s abduction, therefore, as reflective of the ways markets react suddenly to changes. Equity investors try to price in big shifts, only to realize that the long-term impact may not be as significant as initially assumed. He notes that while share prices for energy companies moved following Maduro’s capture, oil prices haven’t shifted significantly as a result.

Instead, oil prices remain fixed at a relatively low point, something that Adatia attributes more to a lack of demand rather than a glut of supply. China, notably, has been using less oil than it has traditionally, and even an OPEC production cut has not been enough to bring oil prices back up. Unless China resumes its oil consumption, or another major demand driver occurs, Adatia believes that prices will stay around their current levels for some time.

While Adatia believes global demand will start to pick up this year, he notes that supply is also likely to increase from a range of sources, which should keep prices relatively low. At the same time, Adatia believes that oil is somewhat undervalued as a commodity and that may correct higher, but outside of a shock that move should be relatively small.

This leaves Canadian oil produces with reserves of bitumen sand, extracting crude at some significant expense only to sell oil on a relatively plentiful market. While Prime Minister Carney made much of how production costs in the oil sands have been brought down, Adatia argues that a decade of ESG-minded investing has resulted in fewer investments that might have helped with more cost-effective extraction.

What Canadian oil companies have in their corner, though, is a generally strong set of balance sheets. Many Canadian energy names have spent the past decade building robust cash reserves, paying down debt, and generating free cash flows to be used for buybacks and dividends. All of that, however, resulted in Canadian energy names outrunning oil prices in 2025, which Adatia believes is now priced in, meaning it would take another move up in oil prices to drive greater appreciation.

Broadly speaking, Adatia and BMO GAM take a neutral view on Canadian energy in 2026. He sees better prospects longer-term, but price overhangs appear likely to hold back growth in the near future. The Venezuelan story, he argues, is a chance for advisors to remind their clients of geopolitical risks and a reminder to policymakers in Canada that economic diversification should remain a priority.

“Obviously, we're heavily reliant on the U.S., and we've already started to reduce the amount we export to the U.S., but we need to continue to do a bit more of that. If the United States, for instance, takes more from Venezuela, there's an opportunity for Canada to do a bit more business with China then because China is one of the bigger importers of that oil from Venezuela. So there are different things that Canada can continue to do to make itself more relevant again on that front. But again, like everything else, it takes time.”