(Bloomberg) — Oil flipped between modest gains and losses as investors weighed the fallout from the capture of Venezuelan President Nicolás Maduro by US forces and the wider impact on oil-market geopolitics.
Brent traded near $61 a barrel. Despite the upheaval over the weekend in Venezuela, the OPEC producer accounts for a small fraction of global supply and the market is already grappling with a swelling glut. US oil company shares jumped in premarket trading after President Donald Trump said American companies will spend billions of dollars to rebuild Venezuela’s crumbling infrastructure.
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“The market has got this right,” Bob McNally, president of Rapidan Energy Group said in a Bloomberg TV interview. “It’s a nothingburger for short-term crude futures, it’s another tailwind for US oil companies and majors.”
Jorge León, a former OPEC official and now Rystad Energy’s Senior Vice President and Head of Geopolitical Analysis, talks about possible supply disruptions, the lack of American oil majors’ response so far and Venezuelan crude’s role in world trade.Source: Bloomberg
Venezuela was once an oil-producing powerhouse but the country’s output has tumbled over the past two decades and now represents less than 1% of global supplies, which is mostly exported to China. The global market is facing a big surplus this year as OPEC+ and others add more barrels against a backdrop of subdued demand growth.
On Sunday, OPEC+ stuck with plans to pause supply hikes in the first quarter. The group, led by Saudi Arabia and Russia, didn’t discuss Venezuela during the 10-minute video conference, according to delegates, who added that it’s premature to gauge how to respond to the unfolding situation.
Despite the US attacks on Saturday, Venezuela’s oil infrastructure — including Jose port and Amuay refinery and main producing areas in the Orinoco Belt — wasn’t affected, according to people familiar with the matter. Still, recent American pressure on Maduro’s regime, including the seizure of tankers, has forced the country to start shutting some oil wells.
Trump said on Saturday that curbs on the nation’s industry will remain in place, but added that US companies will help rebuild the sector and revive output, in what is likely to be a lengthy process. He told reporters that companies wanted to go into Venezuela “badly.”
“Any short-term disruption to Venezuelan output can easily be offset by increased production elsewhere,” Neil Shearing, group chief economist for Capital Economics Ltd., said in a note. “We expect global supply growth over the next year or so to push oil prices down towards $50.”
WATCH: Oil fluctuated as investors weighed the fallout from the capture of Venezuelan President Nicolás Maduro by US forces on global crude supply. Rong Wei Neo breaks down the situation.Source: Bloomberg
US Secretary of State Marco Rubio said on Sunday the US will use leverage over oil to force further change in the Latin American country. Delcy Rodríguez, the acting president of Venezuela, asked the US to work with her country, striking a more conciliatory tone after her initial outrage at the capture of Maduro.