Oil Prices Volatile as Investors Assess US Capture of Venezuela's Maduro

Bloomberg -- Oil prices experienced fluctuations as traders evaluated the implications of the US capture of Venezuelan President Nicolás Maduro on global crude supply and its broader impact on the nation’s energy sector. Brent crude initially dropped by up to 1.2% before recovering to trade near $61 per barrel, while West Texas Intermediate remained above $57. Despite the recent upheaval in Venezuela, the country contributes a minor share of global production and the market is already contending with an excess supply. Neil Shearing, chief economist at Capital Economics Ltd., noted, 'Any short-term disruption to Venezuelan output can easily be compensated by increased production from other regions.' He anticipates that global supply growth over the coming year will drive oil prices down toward $50. President Donald Trump has indicated ambitious plans for revitalizing Venezuela’s oil industry and its substantial reserves. Once a leading oil producer, Venezuela’s output has significantly declined over the past twenty years, now accounting for less than 1% of global supplies, primarily exported to China. The market is expected to face a significant surplus this year as OPEC+ and others increase their output amidst waning demand. During a brief virtual meeting on Sunday, OPEC+ reaffirmed its commitment to pause supply increases in the first quarter but did not address the situation in Venezuela, considering it premature to assess potential responses. Those familiar with the scenario reported that despite the US actions over the weekend, Venezuela's oil infrastructure, including Jose port and the Amuay refinery, remained unaffected. Nonetheless, ongoing US pressure on Maduro's regime has led to the shutdown of some oil wells. Trump stated that while sanctions on Venezuela's industry will persist, American companies are poised to assist in rebuilding the sector and restoring output, albeit likely over a lengthy period. He mentioned on Monday that American firms are eager to engage in Venezuela's market. Haris Khurshid, chief investment officer at Karobaar Capital LP in Chicago, commented, 'US investment and any substantial sanctions relief require time, and oil production does not resume overnight.' Currently, the surplus appears to overshadow geopolitical concerns, placing downward pressure on prices. Additionally, US Secretary of State Marco Rubio indicated that the US would leverage its influence over the oil sector to instigate further changes in Venezuela. In response, Defense Minister Vladimir Padrino called for the immediate release of Maduro, asserting his legitimacy as president.