US Oil Stocks Rally as Trump Vows Venezuela Revival

Ed Morse, Senior Advisor and Commodities Strategist at Hartree Partners, discusses the reaction of commodities markets to the capture of Nicolas Maduro.

Realizing President Donald Trump’s plan for a US-led revival of Venezuela’s beleaguered oil industry could be a years-long and challenging process costing upwards of $100 billion.

Years of corruption, underinvestment, fires and thefts have left the nation’s crude infrastructure in tatters. Rebuilding it enough to lift Venezuela’s output back to its peak levels of the 1970s would require companies to invest about $10 billion per year over the next decade, said Francisco Monaldi, director of Latin American energy policy at Rice University’s Baker Institute for Public Policy.

That’s equivalent to more than a third of what Exxon Mobil Corp. — the largest US oil company — has budgeted this year for capital expenditures around the entire globe.

“A faster recovery would require even more investment,” Monaldi said.

Venezuela sits atop the world’s largest oil reserves. But output plummeted during the 12-year term of President Nicolás Maduro, who was captured early Saturday by US troops. The nation currently produces about 1 million barrels a day, compared to nearly 4 million barrels in 1974.

US Secretary of State Marco Rubio said during an interview with ABC Sunday that he expects US oil companies will be eager for the opportunity to drill for Venezuela’s heavy crude, which is key for refineries on the US Gulf Coast.

“I haven’t spoken to US oil companies in the last few days, but we’re pretty certain that there will be dramatic interest,” Rubio said. “I think there will be tremendous demand and interest from private industry if given the space to do it.”

Yet before they set foot in Venezuela, companies will want to be certain it’s stable, according to Lino Carrillo, a former manager at the nation’s state oil company, Petroleos de Venezuela SA, who fled the country more than two decades ago.

“For any oil companies to actually get serious about investing in Venezuela would require that there will be a new congress or National Assembly,” Carrillo said in an interview. “Not what’s happening now. Definitely not.”

The work needed to repair the nation’s infrastructure, meanwhile, is vast.

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