Let's Look at Likely Winners, Losers After Trump’s Venezuelan Gambit
Events are still unfolding, but we can surmise who would benefit and who could get hurt after the raid in Venezuela.
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In one of the most intriguing foreign policy moves in decades, the president and first lady of Venezuela were abducted under the cover of night on Saturday morning to stand before a court in New York City on various charges. Fortunately, there were no serious American casualties. Unlike the removal of Noriega as head of Panama more than 35 years ago, the operation was lightning quick and did not involve regime change. At least for now, as the vice president of the country has assumed leadership.
The new leader of Venezuela also happens to be the country’s oil minister. The operation was so seamless there has been significant speculation on whether some of Maduro’s inner circle assisted the operation. Interestingly, the markets have all but shrugged off this news as a non-event to this point.
But this move could have both short and long-term ramifications. In this article, I will focus on the potential impacts to the markets, trade and the energy sector while briefly touching on geopolitical implications.
Not surprisingly, Chevron Corporation (CVX) got a five percent bump in trading on Monday, which the shares promptly gave back on Tuesday. Chevron is the only U.S. oil major that still have active ongoing activities in Venezuela. ConocoPhillips (COP) is another name to watch. It has roughly $10 billion in unpaid arbitration awards. These came from the 2007 state seizure of Conoco’s Venezuelan assets. The energy giant obviously has experience in the country.
It is way too early to speculate how the Venezuela situation will play out of over the long-term. But any scenario that results in more heavy crude from the country heading north would be a positive for U.S. refiners. They have the ability to refine this sort of feedstock. Valero Energy (VLO) and PBF Energy (PBF) are two names that would benefit. Consequently, this is a potential negative for Canadian producers like Canadian Natural Resources (CNQ) , whose exports are largely landlocked and would face new competition. This also would further undermine Canada’s trade negotiation leverage as well.
And if the U.S. is targeting Venezuela for narco trafficking, Mexico and Colombia have to be on alert, given these countries are much larger sources of illegal drugs into the U.S. Cuba’s already heavily struggling economy could be dealt a death blow if it loses access to Venezuela crude as well. China would see a minor impact as it is an importer of Venezuelan crude. (This would happen as the much bigger source of its energy imports, Iran, is experiencing its own surge of political volatility.)
Finally, if events unlock Venezuela’s huge energy resources, the oil service complex could receive a significant boost. After two decades of neglect, corruption, and deferred maintenance; Venezuela will need tens of billions of dollars for repairing and improving its energy infrastructure. Names like Halliburton (HAL) could be the likely beneficiary of this increased investment.
It's still early. Potential long-term ramifications could surprise us. Time will tell.
At the time of publication, Jensen was long PBF and VLO.
