Energy stocks are surging after the Venezuela mission. Analysts say oil majors have a long road ahead.
Energy stocks soared Monday morning as investors wagered the US raid on Venezuela would pay off handsomely for the oil industry and related sectors.
Shares of Halliburton jumped nearly 9% in premarket trading, while SLB — formerly Schlumberger — surged 7.5%, and Baker Hughes leaped 6%. Valero, Chevron, ConocoPhillips, and Phillips 66 were all up between 5% and 7% as of around 9 a.m. ET.
Those gains helped fuel a 0.4% rise in S&P 500 futures, while Nasdaq 100 futures gained 0.8% and Dow Jones Industrial Average futures were virtually flat.
Asian and European stocks rose, with Germany’s DAX up 1% and China’s Shanghai Composite closing 2.2% higher. Among the biggest gainers were defense companies, including Germany’s Rheinmetall, up 8%, and Britain’s BAE Systems, up 4.4%.
The US captured Venezuela’s president, Nicolás Maduro, in a military operation over the weekend. President Trump has said that America will “run” the oil-rich country for the near future, and big US companies will come in to fix and update its dilapidated energy infrastructure.
Gold gained 2.3% to trade around $4,400, while silver rallied 7% to roughly $76. Copper, platinum, and palladium all rose by 4% or more.
Russ Mould, AJ Bell’s investment director, said in a morning note that investors were “hedging their bets by increasing exposure to assets with supposed haven qualities.”
The two main crude oil benchmarks, West Texas Intermediate and Brent, rose 1% and 0.9% respectively.
Several analysts said that, assuming the US maintains control of Venezuela, it will take years to fix and upgrade its pipelines and refineries, so there porbably won’t be a material impact on global oil flows for a while.
Mould said that “short-term, there is unlikely to be a flood of new supply due to sanctions, blockades and likely hesitation by oil majors over committing large amounts of money in a country undergoing geopolitical turbulence.”
Allen Good, Morningstar’s director of equity research, said in a morning note that given the high costs and regulatory risks, the “possibility of US companies developing Venezuela’s oil reserves remains far from certain.”
Other close watchers predicted a broad economic boost in the years ahead.
Daniel Casali, Evelyn Partners’ chief investment strategist, said the US tapping Venezuelan oil could help it to “lower inflation, boost real incomes, and support stronger consumption growth, providing a positive impulse to the global economy that should benefit stocks.”
Michael Burry, the investor of “The Big Short” fame, wrote in a Substack post on Monday that harnessing Venezuela’s oil output could push down prices and supply chain costs in the US, and provide more certainty for businesses. He also said the raid had “changed the game” as it could bolster America’s standing relative to China, Russia, Canada, and Mexico.