North American oil prices saw a more than 1% increase on Monday due to recent turmoil in Venezuela, while the stock prices of several major Canadian oil and gas companies experienced a decline in early trading. West Texas Intermediate, the North American benchmark, closed the day trading 1.7% higher, rising approximately $1 to slightly above $58 US. Despite this increase, prices are still relatively low, sitting about $15 lower compared to a year ago.
Concurrently, various Canadian oil and gas companies faced a decrease in their stock prices. The energy index on the Toronto Stock Exchange dropped by around 4.5% by midday on Monday, recovering slightly by the end of the day to a 3.5% decrease. Notably, major oil and gas companies in Canada, such as Suncor Energy, Cenovus Energy, and Canadian Natural Resources Ltd., experienced declines of about four to seven percent in early trading, before partially recovering later in the day.
Venezuela, known for producing heavy crude similar to Western Canada’s oil, has raised concerns about its oil and natural gas production capabilities following recent events. Barry Schwartz, the chief investment officer at Baskin Wealth Management, expressed worries about Venezuela’s ability to increase production, given its substantial oil reserves, comparable to those of Canada.
The removal of Venezuelan President Nicolás Maduro over the weekend has had a significant impact on oil markets due to the country’s vast oil reserves. Despite being a former major producer, Venezuela’s oil output last year was only around 900,000 barrels per day, a sharp decline from its peak production of 3.7 million barrels per day in 1970. This decline was attributed to years of reduced investment caused by sanctions and ineffective government policies.
Although Canadian energy company stocks have dropped, Schwartz believes that the reaction may be exaggerated, emphasizing that rebuilding Venezuela’s energy sector infrastructure to increase production significantly could take years. He highlighted the challenges associated with extracting and refining the expensive heavy crude but acknowledged the long-term value of the reserves.
Overall, the Toronto Stock Exchange and North American markets experienced an increase in value on Monday, despite the fluctuations in oil and gas company stocks influenced by the developments in Venezuela.