Brent rises on Venezuela shock as US takes control
Oil has moved higher after the US forces detained Venezuelan President Nicolas Maduro from the country’s capital Caracas over the weekend.
IMAGE: Flags of the US and Venezuela. Getty Images
The global oil market has moved swiftly in response to renewed geopolitical tensions, after US President Donald Trump said Washington would take control of the OPEC member and confirmed that the US embargo on Venezuelan oil would remain in place.
Trump also reiterated that US oil companies would return to Venezuela to work in its petroleum sector, Reuters reported. “They're [US oil firms] going to spend billions of dollars and they're going to take the oil out of the ground,” Trump said in a press briefing on Saturday.
The trajectory of Venezuela’s oil output this year will hinge on how US sanctions policy develops, according to market analysts.
“Among the few key signals the market is working with for the time being are [US] Secretary of State Marco Rubio telling US media on Sunday that Washington is maintaining its 'oil quarantine' on Venezuela,” VANDA Insights’ founder Vandana Hari said.
Venezuela controls almost 17% of global oil reserves, or 303 billion bbls, Reuters reported. The OPEC member was producing about 3.5 million b/d of crude in the 1970s. However, production fell below 1.1 million b/d last year, the report added.
Washington has long regarded Maduro as an illegitimate “dictator” since he declared victory in the 2018 presidential election, which was widely criticised over claims of serious irregularities.
However, the broader motive behind the move is linked to Venezuela’s past nationalisation of US oil assets, including the ousting of US oil company ExxonMobil in 2007.
“Oil prices steadied after an early wobble as traders weighed two opposing forces triggered by Washington’s move in Venezuela,” remarked SPI Asset Management managing partner Stephen Innes.
“On one hand, geopolitical instability in Latin America argues for a risk premium. On the other, the prospect of Venezuela’s vast reserves eventually returning to market argues the opposite,” Innes added.
By Aparupa Mazumder
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