BNY's John Velis on Venezuela: A Geopolitical Supercycle Catalyst or a Muted Oil Shock?

The core prediction from BNY's John Velis is that the geopolitical shock in Venezuela is not an isolated event, but a catalyst for a new commodities supercycle. He frames the central question: can a single intervention spark a broad, multi-year boom in hard assets? His thesis points to a powerful confluence of forces. First, heightened geopolitical risk is creating a persistent premium for tangible assets. Second, a global increase in money supply provides the fuel for asset inflation. Third, expectations of dovish central bank policies are lowering the real cost of holding non-yielding commodities. This setup, he argues, is structurally similar to the early 2000s environment that drove the last supercycle.

The rally is already showing the breadth of a true supercycle. It began with precious metals, but the momentum is now extending to industrial metals. Velis notes this trend could potentially spread to the energy sector as global growth sentiment for 2026 improves. The specific investment implication is clear: valuations now favor hard assets over traditional equities. In his view, this creates attractive entry points, with industrial demand expected to rise and the macro backdrop supportive. The question for markets is whether this geopolitical catalyst can ignite a sustained, multi-asset boom or if it will prove to be a fleeting, muted shock.

Testing the Thesis: Oil Market Realities vs. Geopolitical Hype

The immediate market reaction to the US intervention in Venezuela presents a stark contradiction to the supercycle narrative. While gold rallied as a traditional safe haven, crude oil futures fell by over 1% on the news. This divergence underscores a fundamental truth: the oil market is currently glutted, and the sheer scale of Venezuela's reserves is not enough to overcome persistent oversupply. The rally in precious metals reflects a flight to tangible assets amid geopolitical uncertainty, but oil's decline signals that the market is pricing in a long, drawn-out recovery rather than an immediate shock.

The structural barriers to a bullish oil outcome are immense. Venezuela sits on 303 billion barrels worth of crude, but unlocking this potential is a multi-year, multi-billion-dollar endeavor. As energy firms have noted, Venezuelan oil investment faces high barriers and would require "durable, bipartisan policy support" from both governments. The physical reality is dire: state oil company PDVSA admits its pipelines haven't been updated in 50 years, with a full infrastructure overhaul estimated to cost $58 billion. This isn't a quick fix; it's a capital-intensive rehabilitation project that would take years to complete, long after any initial geopolitical premium has faded.

Near-term price pressures are also conflicted. The potential loss of discounted Venezuelan crude for Chinese refiners could create a short-term supply squeeze, but this is more than offset by ample global oversupply. Analysts point out that any Venezuelan flow disruptions should have only a moderate impact on oil prices, with the market already braced for a significant supply glut over the coming months. Furthermore, the intervention itself may have a disincentivizing effect. As one analyst noted, lower prices might disincentivize some US companies from producing oil, potentially adding to the supply overhang. The bottom line is that while the geopolitical risk premium may tick higher, it is unlikely to overcome the fundamental bearishness of a market awash in inventory.

This analysis severely tests the supercycle thesis' energy component. For a true supercycle to ignite, oil needs to be a key driver, not a laggard. The evidence suggests the opposite: the intervention is more likely to be a long-term supply-side catalyst that could eventually help ease prices, not a short-term shock that will spike them. The viability of the energy sector within this supercycle appears muted, constrained by physical realities and a market structure that remains oversupplied. The geopolitical catalyst may have sparked a rally in hard assets, but for oil, the path to a sustained boom remains blocked by a mountain of infrastructure and a sea of barrels.

The Divergent Commodity Story: Winners, Losers, and Valuation

The geopolitical catalyst is not a one-size-fits-all boom. It is creating a stark divergence across commodity sectors, with clear winners and losers emerging from the supercycle narrative. The evidence points to a powerful structural support for industrial and precious metals, while the long-term outlook for crude oil remains bearish.

The narrative strongly favors hard assets. The rally has moved beyond gold, with industrial metals now seeing significant growth at the start of the year. This aligns with a specific call from Wall Street, where firms like JPMorgan and Bank of America have predicted gold prices would touch US$5,000 an ounce by the end of the year. The support is multi-faceted: a global increase in money supply, dovish monetary policy expectations, and persistent geopolitical risk are all fueling demand for tangible assets. This creates a favorable valuation setup, where hard assets are seen as more attractive entry points than traditional equities.

By contrast, the long-term bearish view on crude oil persists. The fundamental market structure is oversupplied, and a stable, reformed Venezuela would add significant new supply to an already glutted system. As Franklin Templeton and Julius Baer noted, crude prices would remain depressed in the long run if Venezuela returned to political stability. The intervention itself may cause short-term volatility, but the structural headwinds are too powerful. Any price spike is likely to be fleeting, as the market is braced for a significant supply glut over the coming months.

A secondary, longer-term dynamic involves undervalued commodity currencies. If oil prices eventually recover in the second half of the year, currencies like the Canadian dollar and Australian dollar could benefit. As one analysis noted, undervalued commodity currencies like CAD/AUD may benefit as oil prices eventually recover. This represents a delayed play on the energy sector, where the initial shock is muted but the potential for a gradual supply-side rebalancing could support currency values over time.

The investment implication is a story of selective exposure. The winners are clear: industrial metals and precious metals, which are structurally supported by the supercycle's macro drivers. The primary loser is crude oil, whose path to a sustained boom is blocked by physical realities and a market awash in inventory. For now, the valuation story favors hard assets, with the energy sector's role in this cycle appearing muted.

Catalysts, Scenarios, and Key Risks

The path forward hinges on a few critical variables that will determine whether the supercycle thesis gains traction or the bearish oil outlook prevails. The primary catalyst is the evolution of U.S. policy. The initial geopolitical shock is now being tested by the practicalities of implementation. The key question is whether the stated intent to recruit American companies to invest billions of dollars to refurbish Venezuela's infrastructure translates into durable, bipartisan support from both governments. As energy firms have noted, Venezuelan oil investment faces high barriers and would require significant regulatory changes and historical debt repayments. If bureaucratic hurdles or political friction stall this capital infusion, the long-term supply-side catalyst for oil would be delayed, keeping the structural glut intact and prices suppressed. Conversely, a swift and substantial investment commitment could begin to unlock the country's vast reserves, eventually adding to global supply.

A second major risk is the durability of the new Venezuelan government and regional stability. The interim leadership is fragile, and internal instability or a resurgence of opposition could reignite geopolitical risk premiums. This would be a double-edged sword: it could provide a sustained boost to hard asset prices, reinforcing the supercycle narrative, but it would also threaten the very investment climate needed to rebuild the oil sector. As one analyst noted, we're monitoring Venezuelan leadership negotiations, signs of internal instability, and the pace and nature of the transition. Any setback would likely undermine the medium-term investment thesis for oil.

Finally, investors must watch OPEC+ policy and global demand growth. These forces will determine if the structural oil glut persists or begins to tighten. The market is braced for a significant oversupply over the coming months, and OPEC announced it will continue to pursue its current policy. If OPEC+ maintains or even increases production, it will further dampen any potential price recovery from Venezuela. Conversely, a shift in OPEC+ stance or stronger-than-expected global demand growth could eventually absorb the glut, creating a more favorable environment for oil prices. This dynamic is critical for the long-term bearish view, which holds that crude prices would remain depressed if Venezuela returns to stability.

The bottom line is a framework of competing scenarios. The bullish supercycle thesis requires a smooth policy transition and sustained geopolitical risk, driving hard asset prices higher. The bearish oil thesis is supported by a prolonged implementation lag and a persistent supply glut, keeping oil prices weak. For now, the evidence points to a muted, long-term oil shock, but the watchpoints are clear: monitor U.S. policy execution, Venezuelan political stability, and OPEC+ response.