Volatility grips global oil market as nervous investors assess Venezuela

The oil market was jumpy on Monday after US forces captured the leader of oil-rich Venezuela, sparking speculation on the implications for future crude supplies.

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Having spiked in an initial reaction to the military operation to apprehend Nicolas Maduro in Caracas, oil prices quickly dropped again on expectations that Venezuela - which sits on about a fifth of the the world’s oil reserves ~ will crank up production quickly, adding to an existing supply glut.

But then oil recovered again as investors realised that Venezuela is in no position to make a meaningful impact on oil supply in the short run, even with all the help that US President Donald Trump has promised.

Despite Trump's “obvious desire for US oil companies to ramp up activity in Venezuela, lower oil prices and political uncertainty will frustrate efforts to exploit its vast energy potential”, predicted David Oxley, chief climate and commodities economist at Capital Economics.

“It would take years, and massive investment, to bring Venezuela's oil production back to pre-crisis levels,” said Ipek Ozkardeskaya, an analyst with Swissquote.

Venezuela has the largest proven oil reserves in the world, at around 303 billion barrels, according to Opec.

Trump's promise to rebuild Venezuela's crude production capacity with the help of American companies meanwhile sent stocks in oil majors soaring.

In early Wall Street business, Chevron was up nearly five per cent, while Exxon rose by around 2.5 per cent. Safe-haven investments gold and silver rose on increased geopolitical risk in the wake of the US invasion.