President Venezuela Nicolás Maduro was captured and deported from the country following a large-scale US attack on Caracas. The US is talking about fighting “narco-terrorism” and migrant smuggling. The regime in Caracas claimed that Washington's goal was to take control of oil deposits.
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Donald Trump's administration attacked a country that has more oil than Iraq. Venezuela has massive oil reserves worth 303 billion barrels — about one-fifth of the world's reserves, according to the U.S. Energy Information Administration (EIA). These resources will play a key role in the country's future, writes CNN.
Oil futures do not trade on weekends, so the short-term impact on prices largely depends on how the following days go.
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Maduro's socialist government was hostile to the global oil industry. In the immediate aftermath of the attack, it is unclear what Venezuela's political future will hold — and whether the next government will maintain tight control over the ailing oil industry or unlock its potential by adopting a friendlier approach to the international market, CNN notes.
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Maciej Zieliński, Adam Ziemienowicz / PAP / photos
“Maduro and Chavez devastated Venezuela's oil industry”
“For crude oil, this has the potential to be a historic event,” Phil Flynn, senior market analyst at Price Futures Group, told CNN. “The Maduro and Hugo Chávez regimes have virtually devastated the Venezuelan oil industry.”
U.S. Secretary of State Marco Rubio said U.S. operations in Venezuela ended after Maduro's capture. Venezuelan Vice President Delcy Rodríguez is a member of the socialist regime that took power in the country in 1999, and if she takes power, little is likely to change in the near future.
See also: Venezuelan leader captured by the US. There is the first photo
“The next 24 to 48 hours will be of the utmost importance.”
Donald Trump said on Saturday that he would not allow Nicolas Maduro to be replaced by someone who would continue his policies.
The United States recognizes exiled Edmund Gonzalez as the rightful president of Venezuela, supported by 2025 Nobel Peace Prize winner Maria Corina Machado.
“The next 24 to 48 hours are going to be extremely important,” Flynn said. “If we see signs that the Venezuelan military is supporting the opposition, it will be a great success for global markets. On the other hand, if there is a feeling that this will lead to further conflict or civil war in Venezuela, the reaction will be the opposite.”
Oil in Venezuela
Venezuela has the largest proven oil deposits in the world, but their potential far exceeds actual production. Venezuela produces only about 1 million barrels of oil per day, which is about 0.8 percent. world oil production.
International sanctions imposed on the Venezuelan government and a deep economic crisis contributed to the collapse of the country's oil industry, but also to a lack of investment, according to EIA. Venezuela's energy infrastructure is deteriorating and its ability to produce oil has declined significantly over the years.
Therefore, even if Venezuelan oil supplies were completely cut off from the rest of the world, oil prices – and oil derivatives such as gasoline – would likely not get out of control. The country simply doesn't produce enough oil to make that much of a difference, CNN writes.
The oil Venezuela has requires specialized equipment and a high level of technical advancement to extract it. International oil companies have the ability to extract and refine it, but have been restricted from operating in the country.
In turn, the United States is the largest oil producer in the world. “If everything actually goes smoothly — and so far it looks like a masterstroke — and U.S. companies are allowed to come back and rebuild the Venezuelan oil industry, it could be a game-changer for the global oil market,” Flynn said.
Donald Trump on Venezuelan oil
“We will be heavily involved in the oil sector in Venezuela,” Donald Trump said in an interview on Fox News on Saturday. The US president thus answered the question about the future of the Venezuelan oil sector in the face of the current US blockade of Venezuela.
“We have the greatest oil companies in the world, the biggest, the best, and we will be very engaged,” Trump added.
Source: CNN, PAP
