A Venezuela oil revival could set up winners - and losers - in US energy

"Energy stocks rose on Monday as investors priced in potential gains from renewed US access to Venezuela's massive oil reserves. But analysts say smaller companies could struggle to benefit from a recovery in the country's energy sector. Additional Venezuelan oil supply over the coming years could be "negative for shale producers" that don't have a footprint in Venezuela, Daan Struyven, the head of oil research at Goldman Sachs, said on the firm's "Exchanges" podcast, published on Tuesday."

"That's because prices and volumes could come under pressure if supply growth over the next five to 10 years comes from Venezuela rather than from US shale, he added. The potential strain on shale reflects a key difference in oil quality. Venezuelan crude is heavy and sulfur-rich, while US shale production is dominated by lighter oil. Many US Gulf Coast refineries were originally designed to process heavier crude, making Venezuelan barrels a better fit."

"Greater access to Venezuelan crude could therefore benefit refiners while undermining demand for lighter shale barrels. While light shale oil and heavy crude like Venezuela's are not directly interchangeable, increased supplies of heavy oil can still reshape refinery demand and pricing across the broader market. That kind of change would indirectly pressure US shale producers, who have long been the engine of America's shale revolution."

Investors pushed energy stocks higher as markets priced potential gains from renewed U.S. access to Venezuela's vast oil reserves after the weekend raid and capture of Nicolás Maduro. Additional Venezuelan crude over the next five to ten years could lower global prices and reduce volumes available to U.S. shale growth, pressuring lighter shale barrels. Venezuelan crude is heavy and sulfur-rich, while U.S. shale produces lighter oil; many Gulf Coast refineries are configured for heavier grades, so refiners could benefit. Smaller, highly indebted U.S. shale producers without Venezuelan exposure face the greatest risk from a surge in heavy Venezuelan supply.

Read at Business Insider