US oil companies benefit after Trump signals access Venezuelan reserves
U.S. Oil Companies' Shares jumped Monday fueled by the prospect that the U.S. could gain access to Venezuela's vast reserves of oil after President Donald Trump announced that the U.S. was taking control of Venezuela following the arrest of their president.
Venezuela has the largest oil reserves in the world, but its production has plummeted over the past decades because of?mismanagement?, a lack of foreign investment after the nationalization and sanctions on the oil industry.
Trump stated on Saturday that the U.S. Oil Companies, the largest in the world, would spend billions to fix the oil infrastructure and infrastructure in Venezuela. They will also start earning money for the nation.
Chevron shares, the 'only U.S. oil major operating in Venezuelan oil fields,' rose 7.3% during premarket trading. Meanwhile, refiners Phillips 66 and Marathon Petroleum, as well as Valero Energy and PBF Energy, were all up between 5% to 16%.
The oil prices were mostly flat on Monday as global supplies remained ample despite the uncertainty over Venezuelan flow.
Trump said that the embargo against all Venezuelan oil imports will remain in full effect until?now.
Venezuelan crude oil is a heavy, sulfurous crude with a high content of sulfate. It can be used to produce diesel and other heavier fuels but at fewer margins than those originating from the Middle East.
Ahmad Assiri is a research strategist for Pepperstone. He said that this type of crude oil aligns with the configurations of U.S. Gulf Coast Refineries, which have historically been designed to process these grades.
Chevron, which is already present in Venezuela as part of a U.S. waiver, could be the first to benefit from any shift in policy. Refiners will also gain by having more heavy crude available closer to their home.
RETURN of?assets
Analysts at J.P. Morgan believe that the U.S. move could pave the road for Venezuela to return assets it seized in 2007 when Hugo Chavez was still the leader.
ConocoPhillips, and Exxon Mobil are awaiting arbitration awards that have a greater chance of being recovered.
Analysts said that ConocoPhillips' outstanding claims are in the range of $10 billion, whereas Exxon appears to have damages ranging from $2 billion to $15 billion.
Exxon and ConocoPhillips both rose 4.3%.
The shares of oilfield service firms, whose technology is crucial for boosting Venezuelan crude production, have also increased. Baker Hughes, Halliburton, and SLB all saw gains between 7% and 10%.
Analysts cautioned, however, that any meaningful recovery will likely take time due to political uncertainty, infrastructure degradation and years of underinvestment.
In the 1970s Venezuela produced 3.5 million barrels of oil per day, which was more than 7% global production.
In the 2010s, production fell below 2 million barrels per day and averaged around 1.1 million barrels per day last year. This is about 1% of global supplies.
(source: Reuters)
