Early on January 3, Eastern Time, the United States launched a military operation against Venezuela, raiding the Venezuelan capital Caracas and arresting Venezuelan President Maduro and his wife, plunging the country into political turmoil.
According to industry insiders, Venezuela's crude oil exports have plummeted to historic lows due to US President Trump's order to block all sanctioned oil tankers entering and leaving Venezuelan waters. Now, with Venezuelan port officials not receiving instructions to release fully loaded tankers, the country's crude oil exports are completely paralyzed.
Venezuelan oil exports paralyzed
On Saturday local time, Trump said the "oil embargo" on the country had taken full effect.
According to monitoring data, several ships recently loaded with crude oil and fuel destined for destinations including the United States and Asia have not yet set sail, while some ships that were originally scheduled to load cargo have departed empty. TankerTrackers.com reported that no oil tankers were loading cargo at the country's main oil port, Port of Jose, on Saturday.
However, Arne Lohmann Rasmussen, chief analyst and head of research at A/S Global Risk Management, said that while the scale of the US attack was unexpected, the market had already priced in the conflict with Venezuela. Although the conflict will disrupt oil exports, its short-term impact on the oil market may be limited.
Although Venezuela possesses the world's largest proven oil reserves, according to Rasmussen, the country's current daily oil production is less than 1 million barrels, accounting for less than 1% of global oil production. Furthermore, the country previously exported only about half of its oil production, approximately 500,000 barrels.
He also pointed out that the conflict comes at a time when the global oil market is experiencing oversupply and relatively weak demand, a situation that is more common in the first quarter of each year.
Rasmussen estimates that Brent crude oil prices will only rise by about $1 to $2 (or even less) when futures trading begins on Sunday evening Eastern Time.
“Although this is a major geopolitical event, which people would normally expect to drive up oil prices,” he said, “the key is that there is still a surplus of oil in the market, which is why oil prices are not skyrocketing.”
Is political turmoil actually a negative factor for the oil market?
Bob McNally, an analyst at Rapidan Energy, said he had warned clients before the weekend that about a third of Venezuela's oil production was at risk. While he didn't predict that all of Venezuela's oil production would be cut off, he believes it won't pose a significant risk to the oil market in the short term.
Analysts believe that with Maduro's arrest by the US and subsequent developments in the situation, Venezuelan oil production may eventually increase, potentially leading to a further drop in oil prices.
Saul Kavonic, head of energy research at MST Financial, estimates that Venezuela's oil exports could approach 3 million barrels in the medium term if the new Venezuelan government lifts sanctions and attracts foreign investors back.
"If Venezuela's future has any impact on the market, it will be negative, because Venezuela's output has virtually no other option but to increase," said a US energy official. Industry consultant David Goldwyn, a former senior energy official at the State Department during the Obama administration, said.
At a press conference on Saturday, Trump stated that U.S. oil companies would invest billions of dollars to rebuild Venezuela's energy sector. Trump did not disclose which companies would invest, the methods of investment, or explain how the U.S. would temporarily manage Venezuela "through a consortium."
Godwin stated that given the uncertainty surrounding Venezuela's interim and future governments, it is difficult to predict whether US oil companies will make investments.
He said, "Everything we've learned from the changes of government in Iraq, Afghanistan, and other countries shows that transitions are difficult. No company would be willing to invest billions of dollars in long-term operations without knowing the specific terms. And they can only know the specific terms when they know what the new government will be like."
(Article source: CLS)
