Oil futures fell Sunday night to start the first trading session since the U.S. ousted Venezuelan strongman Nicolás Maduro and President Trump subsequently pledged to dispatch American drillers to revive the country's crude output.
U.S. futures for delivery later this month shed 0.5%, trading at about $57 a barrel after the open Sunday in New York. Brent crude futures were down by even less, trading around $60.50.
Financial markets were generally muted to start the week's trading. U.S. stock futures edged up slightly. Contracts tied to the S&P 500 gained 0.1%. Gold futures rose about 1%, and silver futures continued their rapid ascent, climbing more than 2%.
The move in oil markets reflects expectations among energy traders that significant obstacles remain before Venezuelan oil is flowing more freely into global markets.
Sanctions applied to pressure Maduro's regime have been a pillar of support for oil prices that have been depressed by a growing surfeit.
Benchmark U.S. prices fell 20% last year and are around their lowest levels in nearly five years, threatening the profitability of the U.S. oil industry. American frackers have nonetheless continued to pump record volumes of oil. Meanwhile, the Organization of the Petroleum Exporting Countries and its market allies have been rolling back output cuts.
There is unlikely to be much uplift in Venezuelan oil exports until sanctions are eased.
Secretary of State Marco Rubio said Sunday on CBS's "Face the Nation" that the U.S. would continue to enforce the tanker blockade it initiated last month in an effort to exert pressure on Venezuelan leaders rather than assuming day-to-day governance over the country, as Trump earlier said.
"We continue with that quarantine, and we expect to see that there will be changes, not just in the way the oil industry is run for the benefit of the people, but also so that they stop the drug trafficking," Rubio said.
Tankers headed to Venezuela changed course or became stationary following Saturday's predawn incursion.
Venezuela claims its crude oil reserves exceed 300 billion barrels. If true, that would be the world's largest trove. Yet sanctions and two decades of mismanagement and underinvestment have reduced Venezuelan oil production to a relative trickle.
Analysts warn that even in an orderly transition of power, it will take years and huge sums to bring Venezuelan output back to its historical peak of about 3 million barrels a day from current levels near 900,000 barrels.
By comparison, U.S. output has been notching fresh records approaching 14 million barrels a day, according to the Energy Information Administration. Despite record domestic production, many U.S. refineries, particularly on the Gulf and West coasts, were designed for heavy, sour crude from Mexico and Venezuela and aren't able to process light, sweet oil that the frackers have unleashed.
In an orderly transition, Jefferies analysts estimate that Venezuela could, in three to five years, produce an additional 500 million barrels a day or so through its current joint ventures with global energy firms, including Chevron, the only major U.S. oil company still operating in the country.
"Further increases beyond that level could be much more complex and costly," they wrote in a note to clients Sunday. "The potential to boost Venezuelan production hinges on capital, which in turn depends on political stability and likely requires guarantees from the U.S. government."
American energy companies -- which had no advance warning of the U.S. incursion, The Wall Street Journal reported Sunday -- must decide if they will heed Trump's call to "go in, spend billions of dollars, fix the badly broken infrastructure, the oil infrastructure, and start making money for the country."
Besides a secure environment in which to work, RBC analysts say that oil executives currently working in Venezuela estimate it would cost $10 billion a year to turn around the energy sector.
"This places a heavy burden on U.S. oil companies and will potentially force them to play a quasi-governmental role on the capacity building and development front," they said.
