Venezuela weighs Opec exit as US discusses stake in oil fields

Information Ministry didn’t immediately respond to a request for comment on Thursday.

While such a deal would mark an almost unprecedented intervention by the US in another country’s economy, it’s also in keeping with Trump’s so-called Donroe Doctrine of extending American influence in the Western Hemisphere.

He has described Venezuela as the 51st state and said the US controls its oil.

The move also aligns with the increasingly interventionist approach to business under Trump, whose administration has taken stakes in companies ranging from Intel Corp to rare earths producer MP Materials Corp and lithium miner Lithium Americas Corp. Trump has also pursued natural resources overseas. Last year his administration established a joint investment fund with Ukraine backed by revenues from that country’s minerals, oil and gas projects.

The possibility of the US government taking a direct role in Venezuelan oil projects underscores how the industry is getting upended during a period of political transition. International supermajors are largely taking a cautious approach to Venezuela, while more risk-tolerant independent drillers and investors are jumping in on what many view as the biggest oil opportunity since the fall of the Soviet Union.

Once a prominent member of the oil cartel, Venezuela’s importance has ebbed as US sanctions and domestic turmoil have gutted its petroleum industry. The country pumped 1.16 million barrels a day in July, according to a Bloomberg survey, less than half the amount it produced a decade ago. Output, however, has risen this year.

Given its diminished production, Venezuela’s potential exit is unlikely to have much immediate effect on global oil markets, which are currently dominated by the shockwaves of the US war with Iran.

Yet the idea is gaining traction amid public frustration with the obligations of membership expressed by Iraq and others. Just four months ago, the United Arab Emirates announced it would leave the cartel, threatening the group’s unity and its sway over crude prices.

A Venezuelan exit would heighten doubts over whether Opec — led by Saudi Arabia — can continue to hold together and influence crude prices. A further breakdown could plunge members into a fierce contest for market share, reprising the brief price war of 2020.

Some American officials envision an oil powerhouse built from an alliance between the US and Venezuela that would greatly diminish Opec’s influence, one of the people said.

Caracas isn’t subject to any Opec production limits now given the scale of its slump in recent years, and another person said that freeing the country from any potential quotas would help it maximise production over the longer term and thus lower prices. Washington would be able to pursue its plans for the country’s oil sector unfettered by obligations to another group, the person said.

Source: Theedgemalaysia