Oil prices rise slightly amid US action in Venezuela 

Shares of Chevron, the only US major currently operating in Venezuela's oil fields, climbed 6.5% in pre-market trading, following the ousting of Venezuelan president Nicolas Maduro over the weekend. Photo: Jason Henry/Bloomberg

Oil prices increased by about 1% on Monday as traders assessed the potential impact on oil production following the US capture of Venezuelan president Nicolas Maduro.

Venezuela is home to the world’s largest proven reserve of oil but production plummeted in recent decades due to mismanagement, limited foreign investment following the nationalization of its oil industry and sanctions. It is also a member of the Organisation of the Petroleum Exporting Countries (OPEC).

Following the US intervention in the country over the weekend, US president Donald Trump said Washington would take control of Venezuela.

Brent crude oil futures were up 55c, or 0.9%, at $61.30 a barrel (€52.46) as US. West Texas Intermediate crude oil gained 64c, or 1.1%, to $57.96 a barrel.

In a global market with plentiful oil supply, analysts said any further disruption to Venezuela's exports would have little immediate impact on prices. Output averaged about one million barrels per day last year, equating to about 1% of global production.

Venezuela was producing as much as 3.5 million barrels per day in the 1970s, accounting for more than 7% of global output. Production slid below two million in the 2010.

Venezuela's acting president offered on Sunday to co-operate with the United States.

"The oil market is faced with a surplus unrelated to Venezuela. We can see why the market may focus on the bearish angle of more barrels out of Venezuela; we just do not see that happening quickly," said Bernstein analysts.

OPEC and its allies decided to maintain their output on Sunday. Shares in US oil companies jumped on Monday on the prospect of being granted access to Venezuela’s oil reserves.

Trump told reporters aboard Air Force One on Sunday that he spoke to "all" of the US oil companies "before and after" American forces seized Venezuelan president Nicolas Maduro from Caracas about his plans for investing in the country.

Shares of Chevron, the only US major currently operating in Venezuela's oil fields, climbed 6.5% in pre-market trading, while refiners Marathon Petroleum, Phillips 66, Valero Energy and PBF Energy were up between 4% and 11%.

Trump has said the embargo on all Venezuelan oil exports would stay fully in effect for now.

Venezuelan crude is a heavy sour with high sulfur content, making it suitable for producing diesel and heavier fuels, albeit at lower margins compared with other grades, particularly those from the Middle East.

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"This type of crude aligns well with the configuration of US Gulf Coast refineries which were historically designed to process such grades," said Ahmad Assiri, research strategist at Pepperstone.

Chevron's existing presence in Venezuela under a US waiver has positioned it as a potential early beneficiary of any policy shift, while refiners stand to gain from increased availability of heavy crude closer to home.

Shares of oilfield services firms, whose technology would be crucial to boosting Venezuela's crude production, also climbed. Baker Hughes, Halliburton and SLB were up between 6.6% and 9%.

Still, analysts cautioned that any meaningful recovery would likely take time, given political uncertainty, infrastructure decay and years of underinvestment.

Reuters