- The price of WTI crude oil is up by about 1 per cent in early Monday trading following the Unites States military’s arrest of Venezuelan president Nicolas Maduro and his wife on Saturday morning
- The South American nation’s globally leading oil reserves are estimated at 303 billion barrels
- Increased Venezuelan oil imports are a clear threat to Canada’s role as the US’s largest energy supplier
The price of WTI crude oil is up by about 1 per cent in early Monday trading following the Unites States military’s arrest of Venezuelan president Nicolas Maduro and his wife on Saturday morning, shifting the country’s globally leading oil reserves estimated at 303 billion barrels into center stage.
Maduro, whose socialist government has been in power since 2013, will face narco-terrorism charges in New York, paving the way for what US president Trump has characterized as a revitalization of the country’s “badly broken infrastructure” and the taking of “a tremendous amount of wealth out of the ground,” to be spearheaded by some of the US’s largest oil companies.
These companies will likely include Chevron (NYSE:CVX), the only US-based operator still active in Venezuela after then president Hugo Chavez kicked foreign companies out in 2006 and 2007. Chevron’s existing joint ventures with state-owned Petróleos de Venezuela SA allows it to produce up to 200,000 barrels of oil per day.
Additional players, including Exxon Mobil (NYSE:XOM) and ConocoPhillips (NYSE:COP), may also benefit from Maduro’s capture, supposing that their assets, seized during Chavez’ nationalization, are returned to their balance sheets.
Concurrently, Canadian oil companies have reasons to be pessimistic about the medium to long-term fallout, as Trump’s intention to increase oil production in Venezuela suggests lower prices ahead and greater competition for Canada’s role as the US’s largest energy supplier. Shares of major operators are down in response, with Canadian Natural Resources (TSX:CNQ) giving back 6.28 per cent, South Bow (TSX:SOBO) falling 5.15 per cent and Suncor Energy (TSX:SU) dipping by 3.77 per cent at the time of writing.
While analysts agree that significant increases in Venezuelan oil production are years, if not a decade away, the resources’ ready access would likely put a dent in the approximately 4 million barrels of crude per day that have crossed from Canada into the US since 2020, according to data from the US Energy Information Administration, weighing down companies without a margin of safety to absorb a higher-volume market.
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