Particularly bad for the Canadian economy
- A U.S. intervention in Venezuela would trigger an immediate oil price spike, but analysts expect prices to fall later if regime change leads to sanctions being lifted.
- Venezuela’s heavy crude is a perfect fit for U.S. Gulf Coast refineries, meaning increased Venezuelan supply would directly compete with Canadian heavy oil.
- With over 300 billion barrels of reserves, Venezuela represents a huge long-term prize.
- The most immediate impact of such a move on the part of the Trump administration would, of course, be a price jump. Venezuela has seen its oil production and exports shrink considerably since the start of the U.S. sanction offensive, although in the past couple of years, there has been some recovery in both. The latest export figures, for November, showed a daily average of around 900,000 barrels, which Reuters said was the third-highest for this year.
If that “something” happens, it will have repercussions for the Canadian oil industry as well. Energy analyst David Blackmon noted this in a recent podcast, saying the return of more Venezuelan crude to Gulf Coast refineries will affect demand for Canadian crude, and it would not affect it favorably. In such a hypothetical context, it would be a smart thing for the Canadian government to expand the access of Canadian crude to markets other than the United States, such as China.(Canada has already been expanding trade with China)
Venezuela has oil reserves of over 300 billion barrels. This is 20% of the global total and certainly a prize worth coveting. However, getting to that prize would involve an oil price shock that would be inconsistent with “the key to affordability” as expressed by Secretary Bessent. The situation certainly remains interesting, keeping analysts on their toes, unsure what the endgame of the Trump admininistration is—and as a consequence what the U.S. president would ultimately choose to do with regard to Venezuela. All of this adds a new vector of uncertainty to oil markets.
Recently the US has seized a Venezuelan oil tanker with an eye to seizing more
The United States is preparing to intercept more ships transporting Venezuelan oil following the seizure of a tanker this week, as it increases pressure on Venezuelan President Nicolás Maduro, six sources familiar with the matter said on Thursday.
The seizure was the first interdiction of an oil cargo or tanker from Venezuela, which has been under U.S. sanctions since 2019. The action came as the U.S. executes a large-scale military buildup in the southern Caribbean and as U.S. President Donald Trump campaigns for Maduro’s ouster.