While the capture of Venezuelan President Nicolas Maduro following US airstrikes marked a seismic geopolitical development, early signals suggested that the global oil market would largely take the move in its stride.
Venezuela’s oil infrastructure was not affected after a series of US attacks in Caracas and other states, people with knowledge of the matter said.
Key facilities such as the Port of Jose, the Amuay refinery and oil areas in the Orinoco Belt are still operational, the people said.
Photo: Reuters
While Venezuela was once an oil-producing powerhouse, its output has declined precipitously over the past two decades and now represents less than 1 percent of global supplies. US pressure on Maduro’s regime, including the seizure of tankers carrying Venezuelan crude, forced the country to start shutting some oil wells.
US President Donald Trump on Saturday said that sanctions on Venezuela’s oil industry would remain in place and US oil companies would help rebuild infrastructure and revive output.
Such a reconstruction would be highly ambitious and most likely a distant prospect. In the meantime, worldwide oil supplies are expected to exceed demand by 3.8 million barrels a day this year, which would mark a record glut, the International Energy Agency said.
Crude prices have slumped in recent weeks to about US$60 a barrel.
“I assess that Brent crude prices will rise only marginally at the open on Sunday evening, by US$1-US$2 or even less,” A/S Global Risk Management Ltd chief analyst Arne Lohman Rasmussen said. “Even under normal conditions, a disruption of this magnitude is manageable for the market. In particular, all forecasts point to a significant oversupply in the first quarter, driven by seasonally weak demand and OPEC+ production increases.”
Despite the volatility of the past month, US oil producer Chevron Corp has continued to operate in the country under a sanctions waiver issued by the Trump administration.
“Chevron remains focused on the safety and wellbeing of our employees, as well as the integrity of our assets,” the company said. “We continue to operate in full compliance with all relevant laws and regulations.”
Maduro’s capture raised speculation over the fate of the Venezuelan oil industry in the longer term.
Trump said that US companies would spend billions of dollars to rebuild the Venezuelan oil sector and sell a “large amount” of oil to global buyers, including current customers and new ones.
It was not immediately clear which oil companies he was referring to and he did not specify how soon they would be able to begin production. It was also unclear how willing oil giants such as Exxon Mobil Corp, Chevron, ConocoPhillips and others are to pour substantial sums of money into a country run by a temporary US-backed government without established legal and fiscal rules.
“History shows that forced regime change rarely stabilizes oil supply quickly, with Libya and Iraq offering clear and sobering precedents,” Rystad Energy AS geopolitical analyst Jorge Leon said.
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