JAN 5 – Shares in US energy companies have jumped as investors bet that the US seizure of Venezuelan President Nicolás Maduro will open opportunities to tap the country’s oil reserves.
Shares in Chevron opened more than 4% higher, after surging more than 7% in pre-market trading, while other firms, including ConocoPhillips and Exxon also gained.
Precious metal prices and shares in defence stocks also rose as the intervention increased investors’ concerns about geopolitical risks.
Gold was about 1.9% higher at $4,412 (£3,275) an ounce, while the price of silver was up by 3.6%, as money was moved into so-called “safe-haven” assets.
Prices of precious metals such as gold and silver often rise in times of uncertainty as they are seen as safer assets to hold.
The gold price saw its best annual performance last year since 1979 after rising by more than 60%, reaching an all-time high of $4,549.71 on 26 December.
Those gains were driven by several factors including expectations of more interest rate cuts, major purchases of bullion by central banks and investor concerns about global tensions and economic uncertainty.
Oil prices fluctuated on Monday as investors weighed whether Washington’s intervention in Venezuela would affect crude supplies. Brent crude rose more than 1% to nearly $61.50 a barrel, still below highs seen in recent years, as analysts said ample global supplies would offset any disruption.
Shares in Chevron, the only US company currently operating in Venezuela, rose 4%, while Spanish energy firm Repsol, among the other few Western energy firms with a presence in the country, gained 2%.
Oil services firms also climbed, with Haliburton up more than 7%.
US President Donald Trump has vowed to tap into Venezuela’s vast oil reserves after seizing Maduro and said that the US will “run the country until such time as we can do a safe, proper and judicious transition”.
But industry analysts have said the move is unlikely to have an immediate impact on how much people and businesses pay for energy.
Experts have also said it would cost billions of dollars to fix Venezuela’s oil infrastructure, which has been in sharp decline since the early 2000s.
Venezuela’s crude production has been “lacklustre” for years and now only accounts for around 1% of global oil output, said investment strategist Vasu Menon from OCBC bank.
The former chief executive of BP, Lord Browne, told the BBC’s Today programme that for Venezuela to revive its oil production would take “a tremendous amount of skill investment and time”.
While there might be a “quick pick up” of some production, he added, output might actually fall while the industry is reorganising.
Shares in defence stocks across Europe rose sharply as investors reacted to the US actions in Venezuela.
In the UK, shares in BAE Systems rose 5% while Germany’s Rheinmetall jumped more than 8%.
“Heightened geopolitical tensions like the ones we’ve seen over the weekend would normally spook investors, but global markets have avoided a sell-off,” said Russ Mould, investment director at AJ Bell.
“Defence stocks often move higher when there are heightened tensions between two countries as investors believe events could spur governments to spend more on military protection.
“It was only natural to see the sector in demand after Venezuela’s leader was captured,” he added.
Mining firms also rose following the gain in precious metals prices, with Endeavour Mining and Fresnillo both up more than 4%.
Share markets in Asia made gains as investors focused on news unrelated to developments in Venezuela.
Japan’s Nikkei 225 was up 3% on the first day of trading of the year and new data showed that manufacturing activity stabilised in December.
Major indexes in South Korea and China were also higher.
The jumps reflect confidence that the fallout from events in Venezuela will remain distant, said Zavier Wong from investment firm eToro.
By BBC
