Chevron Corp. and ExxonMobil Corp. signs on the floor of the New York Stock Exchange (NYSE) on Monday, June 27, 2022 in New York, USA.
Michael Nagle | Bloomberg | Getty Images
Shares of U.S. oil companies soared in pre-market trading on Monday as investors watched the fallout from the Trump administration’s surprise military operation in Venezuela.
chevron The stock was up 6.4% as of 7:40 a.m. ET. exxon mobil Exploration and production companies up 3% conocophilips Oilfield services giant rises 5.5% S.L.B. 8.5% increase.
The move comes after the United States conducted a major military operation in Venezuela over the weekend, detaining Venezuelan President Nicolas Maduro and his wife Cilia Flores in a bold intervention that shocked the world.
US President Donald Trump then said the White House would “run” the South American country until there was a “safe, appropriate and wise transition.”
Venezuela is a founding member of the influential energy coalition OPEC and has the world’s largest proven reserves of crude oil at 303 billion barrels, according to the U.S. Energy Information Administration. This corresponds to about 17% of the world’s oil reserves.
President Trump said U.S. investment in Venezuela’s energy sector is now a core goal of his administration.
“We’re going to get a very large American oil company, the largest in the world, to come in and spend billions of dollars to fix up our badly broken infrastructure, our oil infrastructure,” Trump said at a press conference at his Mar-a-Lago mansion in Palm Beach, Florida.
“Let’s start making money for our country,” President Trump said Saturday.
Oil prices were last seen rising slightly on Monday.
international benchmark brent Crude oil futures for March delivery rose 0.5% to $61.03 per barrel, and U.S. West Texas Intermediate futures for February delivery rose 0.6% to $57.64.
Allen Good, director of equity research at Morningstar, said Chevron appears to be best positioned among the oil majors to benefit from U.S. involvement in the Venezuelan oil recovery project, highlighting the company’s significant presence in the country.
Good warned that the Trump administration’s intervention in Venezuela could result in Exxon and ConocoPhillips re-entering the country, but that “tens of billions of dollars of investment will be needed” for Venezuela’s oil industry to meaningfully increase production.
“Until there is greater regulatory and contractual certainty, oil companies will need to be cautious about deploying capital,” Good said.
“While Chevron may be able to increase production in the near future with US approval, meaningful volume increases are likely to be several years away. With this in mind, the likelihood of US companies developing Venezuela’s oil reserves remains far from certain,” he added.
“Long term play”
Neil Atkinson, an independent energy analyst and former employee of Venezuela’s state-run oil company PDVSA, based in London, said there are several challenges that need to be addressed when it comes to rebuilding Venezuela’s oil industry.
“Look at the irony, we want to get Venezuela’s oil industry back up and running. If we want to do that, we can’t do it without stability. So we have to make sure we have law and order, and right now we don’t have law and order,” Atkinson said Monday on CNBC’s “Squawk Box Europe.”
“We must guarantee that there is a stable supply of electricity, which is not currently available. We must ensure that there is a reliable supply of food and fuel where it is not currently available. Therefore, many things have to happen, but it cannot happen without the consent of the Venezuelan people,” he added.
On December 17, 2002, demonstrators carrying Venezuelan flags approach the oil tanker Minerva Astra, which is docked in Maracaibo, Venezuela.
Andrew Alvarez | AFP | Getty Images
Asked whether U.S. oil companies would want to expand into Venezuela given relatively low oil prices, Atkinson said: “Yes, I would think so for long-term strategic reasons. But as you say, prices are low right now.”
He added: “There are special challenges in terms of Venezuela’s increased oil production, the type of oil, the cost and complexity of processing. But it’s going to be a long game for them. To me, that’s the main reason why investors may feel more positive about these companies.”
—CNBC’s Spencer Kimball contributed to this report.
