US oil's premarket surge on Venezuela optimism loses steam

Shares of Chevron Corp gave up most of their premarket gains on Monday (January 5), trading up just 1–3% after surging as much as 10% that Bloomberg before markets opened.

ConocoPhillips and Exxon Mobil

also pared early gains, reflecting growing caution over the feasibility of US investment in Venezuela.

The oil stocks enjoyed major gains after the US captured Venezuelan President Nicolas Maduro and promised billions in investment opportunity for US oil companies.     

Shares of Chevron Corp rose as much as 10% in premarket trading on Monday (January 5) while others such as ConocoPhillips and Exxon Mobil also saw their shares edge higher in reaction to the possibility of deeper access to Venezuela’s vast oil reserves.

“We’re going to have our very large United States oil companies — the biggest anywhere in the world — go in, spend billions of dollars, fix the badly broken infrastructure, the oil infrastructure,” Trump told media. 

However, there's no clarity yet on the mechanism or legality of such investment despite apparent market optimism. 

Venezuela holds the largest oil reserves in the world at 303 billion barrels or 17% of global reserves. In the last decade, China has emerged as its biggest buyer, especially after the US imposed sanctions on Venezuela’s state-run PDVSA in 2019.   

Also Read: Maduro set to appear in US court to face narco-terrorism charges

At present, Chevron is the only US company operating in Venezuela and remains best positioned to pocket immediate gains, if any. 

For other oil majors, the situation is more complicated. ConocoPhillips and Exxon Mobil exited Venezuela years ago after their assets were nationalised and they are owed $8 billion and $1 billion, respectively.

ConocoPhillips said over the weekend it was too soon to discuss any potential return to Venezuelan operations. Exxon’s CEO Darren Woods had previously said the company would evaluate opportunities but remains wary given past expropriations, according to Bloomberg.

More business leaders in the US are gearing up for investment opportunity in the South American country. The Wall Street Journal reported that about 20 business leaders, including heads of hedge funds, plan on visiting the country in March to assess investment opportunities. 

Sixty three-year-old Venezuelan leader Nicolas Maduro and his wife Cilia Flores will now face narco-terrorism charges at Manhattan federal court. They were captured by the US military in a surprise raid over the weekend in what has become the most controversial US intervention in Latin America since the invasion of Panama.