Buying S&P/ASX 200 Index (ASX: XJO) energy shares like Woodside Energy Group Ltd (ASX: WDS) and Santos Ltd (ASX: STO)? Then you'll want to keep one eye on what's unfolding in South America.
As I'm sure you're aware, over the weekend the United States sent special forces into Venezuela, capturing President Nicolas Maduro and his wife, Cilia Flores.
US President Donald Trump has a long running feud with Maduro, who stands accused of narco-terrorism.
But, in a development relevant to ASX 200 energy shares like Woodside and Santos, the US president also clearly has an eye on Venezuela's oil riches.
At a press conference, Trump said (quoted by Bloomberg):
We built Venezuela's oil industry with American talent, drive and skill, and the socialist regime stole it from us during those previous administrations, and they stole it through force. This constituted one of the largest thefts of American property in the history of our country.
In the first two days of trading on the ASX following the US military operation, Woodside shares have slipped 0.9% while Santos shares are down 0.8% since Friday's close.
As for the other big Aussie energy stocks, Beach Energy Ltd (ASX: BPT) shares have dropped 2.6% over this period, while the Karoon Energy Ltd (ASX: KAR) share price is down 2.4%.
That's despite a slight uptick in global oil prices since Friday, with Brent crude oil now trading for US$61.63 per barrel amid concerns of short-term disruptions to Venezuela's oil exports.
Image source: Getty Images
How much could Venezuela's oil impact ASX 200 energy shares?
Over the short to medium-term, the direct impact on ASX 200 energy shares like Woodside and Santos from the US incursion into Venezuela is likely to be minimal.
Twenty years ago, the nation was producing around three million barrels of oil per day. Over the past year that had fallen to less than a million barrels per day, or enough to meet about 1% of global demand.
While analysts agree it will take at least a few years before Venezuela's production is able to ramp back to earlier levels, or beyond, it's worth noting that the country sits on one of the world's largest oil reserves.
Stephen Dover, head of Franklin Templeton Institute, believes the nation could produce more than five million barrels per day by 2030, representing some 5% of global oil production.
Noting this would be "enough to keep oil prices depressed for longer", Dover said (quoted by The Australian Financial Review):
Over the longer run, a more stable, productive, and prosperous Venezuela will have the potential to offer the world significant supplies of oil. That would be significant for global growth, but it will take political stability and considerable investment to unlock that potential.
Goldman Sachs strategist Daan Struyven added (quoted by Bloomberg), "Any recovery in production would likely be gradual and partial as the infrastructure is degraded and would require strong incentives for substantial upstream investment."
Goldman doesn't see Venezuela's oil output lifting materially until 2030. But the broker said the Brent crude oil price could end up US$4 per barrel below its existing forecast for 2030 if the nation ups production to two million barrels per day by then.
And ASX 200 energy shares like Woodside and Santos have some big US competitors that might step in to help kick start Venezuela's oil revival.
"All of our oil companies are ready and willing to make big investments in Venezuela that will rebuild their oil infrastructure," White House spokeswoman Taylor Rogers said.
