Venezuelan Oil Exports Paralyzed

In the early hours of January 3rd, Eastern Time, the United States launched a military operation against Venezuela, raiding the capital Caracas and capturing Venezuelan President Maduro and his wife, plunging the local political situation into chaos.

According to industry insiders, Venezuela's oil exports have dropped to a historic low due to U.S. President Trump's order to block all oil tankers entering and leaving Venezuelan waters as part of sanctions. Now, as the Venezuelan port officials have not received instructions to release fully loaded oil tankers, the country's oil exports have completely come to a standstill.

On Saturday local time, Trump stated that the "oil embargo" on the country has fully taken effect.

According to monitoring data, several ships loaded with crude oil and fuel destined for locations including the United States and Asia have not yet set sail, while some ships originally prepared to load cargo have left empty. TankerTrackers.com stated that on Saturday, not a single tanker was engaged in loading operations at the country's main oil port, Jose Port.

However, Arne Lohmann Rasmussen, chief analyst and head of research at A/S Global Risk Management, stated that although the scale of the U.S. attack was unexpected, the market had already priced in the conflict with Venezuela. While this conflict will disrupt oil exports, the short-term impact on the oil market may not be significant.

Although Venezuela has the world's largest proven oil reserves, according to Rasmussen statistics, the country's current daily oil production is less than 1 million barrels, accounting for less than 1% of global oil production. Meanwhile, the country previously exported only about half of its oil production, approximately 500,000 barrels.

He also pointed out that this conflict comes at a time when the global oil market is experiencing an oversupply and relatively weak demand, a situation that is common in the first quarter of each year.

Rasmussen estimates that Brent crude oil prices will only rise by about 1 to 2 dollars (or even lower) when futures trading begins on Sunday evening Eastern Time.

"Although this is a significant geopolitical event that would typically be expected to drive up oil prices," he stated, "the key point is that there is still an excess of oil in the market, which is why oil prices won't skyrocket."

Bob McNally, an analyst at Rapidan Energy, indicated that he had already warned clients before this weekend that about one-third of Venezuela's oil production was at risk. Although he did not predict that all of Venezuela's oil output would be halted, he believes that in the short term, this does not pose a significant risk to the oil market.

Analysts believe that with Maduro being captured by the U.S. and the subsequent developments in the situation, Venezuela's oil production may eventually increase, and oil prices may further decline.

Saul Kavonic, head of energy research at MST Financial, estimates that if a future Venezuelan government can lift sanctions and attract foreign investors back, Venezuela's oil exports could approach 3 million barrels in the medium term.

"If the future of Venezuela is to have any impact on the market, it is to have a negative impact, because Venezuela's production has no other way but to increase," said David Goldwyn, a U.S. energy industry consultant who was a senior energy official at the State Department during the Obama administration.

At a press conference on Saturday, Trump stated that American oil companies would invest billions of dollars to rebuild Venezuela's energy sector. Trump did not disclose which companies would be making the investments, nor did he explain the method of investment or how the U.S. would "temporarily manage Venezuela through a group."

Godwin stated that given the uncertainty surrounding the interim government and the future government of Venezuela, it is difficult to predict whether American oil companies will invest.

He said: "Everything we've learned from the experiences of government transitions in Iraq, Afghanistan, and other countries indicates that the transition is difficult. No company would be willing to invest billions of dollars for long-term operations without knowing the specific terms. Only by knowing what the new government will be like can they understand the specific terms."