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Burry warns markets underestimate Venezuela raid's global impact
Investor Michael Burry, famed for foreseeing the 2008 financial crisis, argues that financial markets are dramatically underplaying the ramifications of the United States' bold military operation in Venezuela. He contends that the muted response in oil prices and stock movements conceals a seismic shift in global power dynamics, with ripples extending from Beijing to Moscow. In a recent Substack newsletter post, Burry described the January 3 capture of Venezuelan President Nicolás Maduro and his wife from their Caracas residence as a paradigm-shifting event, despite markets shrugging it off.
At the core of Burry's analysis lies China's deep financial stake in Venezuela. Beijing has poured over $100 billion in loans into the country through its Belt and Road Initiative, largely secured against future Venezuelan oil production. With that production now falling under American oversight following the raid, Burry posits that China's collateral has been effectively nullified, forcing Peking to recalibrate risks far beyond Latin America. He frames the U.S. action as a stark warning shot to China, potentially altering Beijing's aggressive postures in the South China Sea or toward Taiwan.
Burry also predicts diminished long-term relevance for Russian oil, as revived Venezuelan supplies bolster U.S. energy dominance and erode Moscow's leverage. He quipped that Russian President Vladimir Putin must be stunned, noting the U.S. achieved in seconds what Russia has struggled for years to accomplish in Ukraine. American oilfield service giants like Halliburton, Schlumberger, and Baker Hughes stand to gain handsomely from contracts to overhaul Venezuela's dilapidated pipelines and refineries. Shares in Halliburton and Schlumberger surged 7 to 9 percent on Monday, while refiners Valero Energy and Phillips 66 climbed around 7 percent.
Venezuela holds the world's largest proven oil reserves, approximately 300 billion barrels or 20 percent of the global total. Over the past two decades, China extended more than $100 billion in loans under Presidents Hugo Chávez and Nicolás Maduro, often repaid via oil shipments peaking at 500,000 barrels per day in 2017. Beijing already grapples with $10 billion in unpaid loans after Venezuela's 2017 default and tightened U.S. sanctions. President Donald Trump's declaration that the U.S. will manage Venezuela's oil sector now heightens those challenges for China.
Markets have shown restraint amid the geopolitical jolt. West Texas Intermediate crude hovered around $58 per barrel on Tuesday, up less than 1 percent from pre-raid levels, with Brent near $60. Analysts point to expected oversupply, as the International Energy Agency forecasts a 3.8 million barrels-per-day surplus in 2026. JPMorgan projects Venezuelan output rebounding from 1.1 million barrels daily to 1.3-1.8 million within two years post-transition, potentially hitting 2.5 million over the next decade with major investments. Yet consensus holds that rebuilding infrastructure riddled with decay will span five to seven years, far beyond Trump's 18-month optimism.
