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Economy

Markets shrug off Venezuela intervention despite oil transfer

Wednesday 07 - 14:20

By: Dakir Madiha

Markets shrug off Venezuela intervention despite oil transfer

Financial markets have shown a surprisingly muted response to the U.S. military intervention in Venezuela and President Donald Trump's announcement that the country will transfer up to 50 million barrels of oil under American control. Some analysts warn investors may be underestimating the geopolitical ripple effects of what they call a paradigm shift in global energy markets. Oil prices dipped modestly Wednesday, with West Texas Intermediate settling around $56.50 per barrel and Brent at about $60.25 per barrel down roughly 1 percent as markets digested Trump's Tuesday evening statement on Venezuela handing over 30 to 50 million sanctioned barrels for market-priced sales. Trump said he would oversee revenues "to ensure they benefit the Venezuelan people and the United States."

Despite geopolitical turbulence following the weekend capture of Venezuelan President Nicolás Maduro by U.S. forces, major stock indexes hit fresh highs. The Dow Jones Industrial Average closed above 49,000 for the first time Tuesday, up 485 points or 1 percent, while the S&P 500 rose 0.6 percent to its first record since late December. Energy stocks outperformed broadly, with Chevron gaining 4 to 5 percent, Valero Energy jumping 8.7 to 9.2 percent, and SLB (formerly Schlumberger) climbing 7 to 9 percent as investors bet on Venezuelan oil infrastructure rebuilds. Halliburton and Baker Hughes each advanced over 6 percent.

Gold hit around $4,475 per ounce Tuesday, up more than 68 percent year-over-year, as investors sought safe havens amid rising tensions. Silver futures topped $80 per troy ounce, rising 5.7 percent. Michael Burry, famed for predicting the 2008 financial crisis, cautioned markets "aren't pricing in everything that could flow from this weekend's events." In his Substack newsletter, Burry labeled the U.S. action a "paradigm shift" and "warning to China," noting Chinese loans to Venezuela backed by future oil production now rest "in U.S. hands."

The subdued reaction reflects Venezuela's diminished role in global energy supply. The country produces under 1 million barrels per day now, versus over 3 million in the 1990s less than 1 percent of world supply. The International Energy Agency forecasts a 2026 global oil surplus of 3.8 million barrels per day, roughly double Venezuela's current total output. "Surplus is substantial," said Andrew Botterill, analyst at Deloitte Canada. "We're in a major oversupply situation of about three million barrels per day."

Burry spotlighted U.S. oilfield services firms like Halliburton, SLB, and Baker Hughes as potential winners, saying they "should see significant benefits" from years of deferred Venezuelan energy infrastructure maintenance. He suggested higher Venezuelan oil flows could provide "long-term tailwinds" for the U.S. economy by curbing fuel costs. Restoring Venezuelan production demands massive investment, however. Rystad Energy estimates sustaining current levels requires over $53 billion over 15 years, while returning to a 3.5 million barrels-per-day peak would need $183 billion.

The situation raises broader concerns for U.S.-China ties, with China holding an estimated $10 billion in Venezuelan debt from Belt and Road Initiative loans. Beijing was Venezuela's top oil buyer before tightened U.S. sanctions, though Venezuelan crude now accounts for just 2 percent of China's total imports. Trump plans to meet Friday with leaders from major U.S. oil firms including Exxon Mobil, Chevron, and ConocoPhillips to discuss Venezuelan petroleum sector investments.