Trump’s Venezuela strikes stoke fears of oil price rise that could push up

Regime change in Venezuela could result in a rise in oil prices that may push up petrol and energy costs for consumers, analysts warned last night.

Global oil markets were convulsed after US forces launched strikes on the South American country yesterday morning and captured its president Nicolas Maduro and his wife Cilia Flores in what Donald Trump dubbed ‘an extraordinary military operation’.

The American President added that the US would also take control of Venezuela’s oil industry which he said had been a ‘total bust for a long period of time’.

‘We’re going to have our very large United States oil companies… go in, spend billions of dollars, fix the badly broken infrastructure, the oil infrastructure, and start making money for the country,’ Trump told reporters at his Mar-A-Lago resort yesterday.

But analysts warned that in the short term a sudden halt of Venezuelan oil exports following the US strikes, as well as civil unrest in the country, would likely cause a rise in prices.

Initial estimates are that crude could increase by as much as $3 per barrel as concerns about Venezuela’s stability roiled markets.

‘It’s very likely there will be a vacuum of power… we could be in a situation where there is lots of civil unrest,’ Jorge Leon, head of geopolitical analysis at research firm Rystad Energy, told The Mail on Sunday. 

‘If that is the case we’re going to see upward pressure on oil prices in the short-term.’

UBS analyst Giovanni Staunovo added that prices would depend heavily on a smooth transition of power following Maduro’s capture.

‘It is unclear if the removal of Maduro can stabilise the country or if it will result in… a power vacuum. If that is the outcome, oil prices would rise,’ he added.

Carol Bell, former director of oil and gas at Chase Manhattan Bank, now part of US banking giant JP Morgan, predicted ‘a slight tick up’ in oil prices when markets opened on Monday but stressed that any rises at the pumps were likely to be ‘muted’.

A loss of supply in Venezuela could also exacerbate disruption caused by ongoing anti-government protests in oil-rich Iran.

The Middle East nation is a much more critical part of the global energy market due to its location next to the Strait of Hormuz, through which around 20 per cent of the world’s oil passes each day.

Despite concerns about a short-term increase, analysts said oil prices could eventually fall if the US lifted strict sanctions on Venezuela, easing pressure on consumers dealing with higher fuel costs.

Ashley Kelty, analyst at broker Panmure Liberum, told the MoS that if a more favourable government was installed in Venezuela it would reduce American reliance on imports from the Middle East and Africa, saying: ‘The exports from Venezuela are primarily heavy oil, which US refineries are more geared towards processing.’

This, Kelty said, would create a glut of Middle Eastern oil on global markets that would have been sold to the US market, potentially meaning lower prices.

Saul Kavonic, an analyst at MST Financial, told the Financial Times that, under a new government, oil exports from Venezuela could eventually rise to 3 million barrels a day if sanctions were eased and foreign investment returned to the country’s energy industry after decades of being closed off.

Venezuela is estimated to have the biggest oil reserves in the world at over 300 billion barrels, more than Saudi Arabia, the UAE or Iran. But the country only accounts for less than 1 per cent of global crude exports, shipping out around 800,000 barrels per day.

The small amount has been blamed on mismanagement by the Caracas government of the state-run energy firm PDVSA as well as tight sanctions by the US which has previously threatened to seize tankers carrying Venezuelan oil.

If a new pro-US government was to replace the Maduro regime, and these restrictions were lifted, it could spark a flood of fresh oil into the international markets.