President Trump's "Donroe Doctrine" positions energy security in the West as a key pillar of US national security.
The removal of socialist Nicolás Maduro and the subsequent massive Venezuelan oil deal represent the opening act in a longer-term effort to rebuild production and secure supplies closer to the Gulf of America.
Piper Sandler global energy strategist Jan Stuart's view, however, highlights the time required for these new Venezuelan supplies to ramp up: any meaningful recovery in Venezuelan output could take years, with a return to historic production highs potentially requiring a decade or two. That timeline clashes with the view that additional Venezuelan barrels could provide near-term relief to US refiners amid the global diesel crisis.
"We'll stay tuned but suspect that reaching the old record highs will take a decade or 2 and oodles of good fortune," Stuart wrote in a note.
Trump described the US-Venezuela deal as the "biggest oil deal in history" and said it would amount to control of 65 billion barrels of oil reserves.
North American Blue Energy Partners is set to develop the oil fields, with the Department of War holding a 35% stake in the venture and rights to a portion of its production. Venezuelan royalties and taxes could total roughly $200 billion over 25 years.
A Reuters report last week said ExxonMobil was negotiating a return to Venezuela's Orinoco Belt for the first time in nearly two decades.
Venezuelan bonds have rallied around these developments but the risk to investors is for a prompt revival.
Beyond energy supplies, Venezuela reportedly prepared its first aluminum shipment to the US in years last week: 15,000 metric tons from state-owned Venalum, facilitated by Mercuria Energy Group and Heeney.
The cloud hanging over Venezuela's resources revival is the outcome of the US midterms. Stuart questioned whether US military backing for the oil deal would survive the next US election. Rebuilding production could take a decade or two. Investors now have to ask whether Trump's commitment can last that long.
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