Venezuela’s Oil Potential Stirs Excitement In Local Markets

Shares of major U.S. energy companies jumped sharply Monday after President Donald Trump announced plans for the United States to take control of Venezuela’s oil industry, saying American companies would help revive production after the capture of President Nicolás Maduro.

For Wyoming, where energy jobs and state revenues are closely tied to oil and gas markets, the announcement sent a ripple through the industry.

While analysts say the move is unlikely to immediately raise oil prices because the market is already oversupplied, it could have major long-term implications for U.S. energy production and global politics.

Thanks to the shale boom, the United States is already the world’s largest oil producer — a shift felt strongly in energy-producing states like Wyoming. On top of that, massive oil discoveries offshore Guyana are largely controlled by U.S. companies such as ExxonMobil and Chevron.

If the U.S. were to gain influence over Venezuela’s oil sector — home to the largest proven oil reserves in the world — analysts say it could significantly reshape global energy markets.

JP Morgan analysts wrote Monday that combining U.S. production with influence over Venezuelan reserves could give the U.S. control over as much as 30% of the world’s oil reserves. That kind of leverage, they said, would represent a major shift in global energy dynamics and could help keep oil prices lower and more stable over time.

Venezuela’s oil industry, however, is in rough shape after years of neglect and international sanctions. The country currently produces about 1.1 million barrels of oil per day, far below historic levels. Some analysts believe output could double or even triple with major investment, though others caution that progress would be slow and costly.

Neal Dingmann of William Blair said political risk, aging infrastructure and today’s relatively low oil prices could make U.S. companies hesitant to invest billions in Venezuela anytime soon. Any meaningful production increase would likely take years and require massive infrastructure upgrades.

That uncertainty matters in Wyoming, where oil prices directly affect drilling activity, jobs in the Powder River Basin, and state and local tax revenues. U.S. crude prices are already down about 20% from a year ago and haven’t topped $70 per barrel since June. By comparison, oil prices soared above $130 per barrel before the 2008 financial crisis.

Other factors that could affect Venezuelan production include how quickly a new government could stabilize and how willing multinational oil companies would be to return, according to analysts at Raymond James.

Despite those questions, Wall Street reacted quickly. Energy stocks rose across the board at the opening bell, especially companies involved in refining and oilfield services.

Venezuela produces heavy crude, which is used to make diesel fuel, asphalt and fuels for heavy equipment — products important to industries like trucking, construction and mining. Diesel remains in tight supply worldwide due to sanctions on Venezuelan and Russian oil and because lighter U.S. crude can’t easily replace it.

Large refiners such as Valero, Marathon Petroleum and Phillips 66 saw shares rise between 5% and 6%. Oilfield service companies — the firms that do the drilling and maintenance work familiar to many Wyoming energy workers — climbed even more. SLB and Halliburton gained between 7% and 8%.

Major oil producers including ExxonMobil, Chevron and ConocoPhillips also moved higher, rising between 2% and 4%.