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stocks issues market commentary from deVere Group.
Venezuelan oil supply is becoming “politically elastic”
with volumes now dependent on US electoral and foreign-policy
dynamics, adding a new layer of volatility, warns the CEO of global
financial advisory giant deVere Group.
The warning from Nigel Green comes as the first US-authorized sale of
Venezuelan crude was to a company whose senior oil trader donated to
Donald Trump’s re-election campaign and attended a White House
meeting with the president last week.
Venezuelan oil policy now sits squarely within the US administration.
John Addison, a senior trader at Vitol who has given about $6mn to
political action committees backing Trump’s re-election effort,
played a central role in securing his company’s $250mn deal for
Venezuelan crude.
The transaction triggered the president’s controversial plan to
release up to 50mn barrels of Venezuelan oil onto the market.
Nigel Green says:
“Oil traders can’t easily price political elasticity. It
turns barrels into a policy instrument. Supply can now expand or
contract on the back of decisions taken in Washington, and markets
have to charge for that uncertainty.”
He adds: “The US now exercises decisive influence through
authorizations, counterparties, and the financial and logistical
permissions that determine where crude can be sold.
“Market access has become the lever of power, and risk
premiums rise when that lever is political.”
Venezuela holds the world’s largest proven oil reserves, yet
production remains far below potential after years of underinvestment
and sanctions.
Recent policy shifts allow oil to move again, but under conditions
shaped by US political priorities rather than long-term sector
strategy.
“Investment in Venezuela’s energy future is now being
channelled through US policy decisions,” explains the deVere
CEO.
This means producers lose autonomy, some traders gain influence, and
the structure of the market changes in ways that undermine
stability.”
Venezuelan crude is heavy and sour, suited to specific refinery
configurations, particularly along the US Gulf Coast.
When supply becomes contingent on politics, refiners face planning
risk that goes well beyond price swings. A single policy shift can
force rapid changes in crude slates, raise procurement costs, and
squeeze margins across fuels and petrochemical feedstocks.
Nigel Green continues:
“When Venezuelan supply could appear, disappear, or reroute at
political speed, it reshapes differentials, freight rates, and
refinery economics far beyond Latin America.
“The distortion could spread through the entire energy
complex.
“Markets cope with disruption when rules stay consistent. They
struggle when supply is tied to political calendars and strategic
signalling.
“Hedging becomes harder, volatility becomes structural, and
uncertainty could embed itself into pricing.”
The consequences extend well beyond energy desks. Higher and more
erratic oil prices tighten financial conditions for importing nations,
worsen trade balances, and place pressure on currencies. In emerging
markets, that combination lifts risk premia and reduces capital flows
at the margin.
“Energy remains the world economy’s most important
input,” says the CEO.
“When oil volatility rises, inflation risks rise, growth
assumptions weaken, and central policy choices become more
constrained. The spillover can hit equities, credit and foreign
exchange at the same time.”
Shipping and insurance add another transmission channel. Politically
sensitive trade routes and rapidly changing counterparties can drive
sudden moves in freight and cover costs, pushing delivered crude
prices higher even when headline supply appears adequate.
Nigel Green concludes:
“Venezuelan oil now appears to be a Washington-based,
political-influence story.
“The significance lies in the fact that political volatility
in energy can become volatility across the entire financial
system.”
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