Securities industry "U.S. airstrike on Venezuela… Limited impact on oil prices" [Analysis+]

"Short-term upward pressure on oil prices possible"

"Long-term downward stabilization expected"

On the 3rd (local time), the United States attacked Venezuela, arrested President Nicolás Maduro and transported him to the United States, drawing market attention to future oil price movements. On the 5th, domestic experts judged that while the U.S. airstrike on Venezuela could cause oil prices to fluctuate, it would likely be limited to short-term volatility because Venezuela's influence in the crude oil market is not large.

According to foreign media, on the 3rd the United States carried out a sudden military operation to arrest President Nicolás Maduro, the 'iron-fisted ruler' of Venezuela, and transport him to the United States. U.S. President Donald Trump announced the success of the 'Maduro arrest operation' at a morning press conference that day, saying Maduro had been ousted and "we will operate Venezuela until a safe and wise transfer of power can be made."

Some abroad feared the U.S. military operation could escalate into an oil war and bloodshed, but most domestic experts forecast that the impact on international oil prices will be limited. They see it likely to be limited to a short-term rise.

Kim Kwang-rae, a researcher at Samsung Futures, said the U.S. attack could put upward pressure on oil prices in the short term.

He said, "Venezuela's crude oil production is at the level of about 1,000,000 barrels, accounting for less than 1% of global production, but this military friction was wrapped up quickly and there has been no further military provocation from Venezuela. There are also no sanction moves from Western countries," while adding, "Venezuela was a country expected to gradually recover production and exports after sanctions were eased, so military conflict could highlight the possibility of disruptions to oil production and exports and a geopolitical risk premium could be reflected in oil prices."

The researcher said, "In particular, direct U.S. military involvement could stir supply concerns across Latin America and act as a factor for a short-term sharp rise in oil prices." However, because Venezuela's actual export volume is still limited and this year OPEC＋ has announced production increases and global demand slowdown concerns coexist, the increase is expected to be limited in the mid-to-long term.

Jeon Yoo-jin, an energy researcher at iM Securities, said, "The fact that the presidential couple was transported suggests quite an aggressive airstrike," and noted that "in the short term, the psychological discomfort of escalating geopolitical conflict could push up oil prices."

But she expected the intensity and persistence to be very limited. Although Venezuela ranks first in the world in terms of oil reserves, long-standing sanctions and aging facilities have kept production at less than 1%. Jeon said, "Even the production of 900,000 b/d (barrels per day) flows more than 80% to China due to U.S. sanctions, and after the airstrike Venezuela's oil fields, refining facilities, and ports are understood to be operating normally," explaining that "there will not be a large actual supply disruption."

Park Sang-hyun, an economic sector researcher at the same securities firm, also said, "As a new geopolitical risk, oil price reaction has emerged as a short-term variable that could increase volatility in global financial markets such as foreign exchange markets," but added, "Given Venezuela's negligible share in the international oil market due to previous U.S. sanctions, the adverse effect of the Venezuela situation on oil prices is expected to be limited."

There were also analyses that international oil prices will stabilize downward in the long term.

Hwang Byung-jin, head of FICC Research at NH Investment & Securities, said, "President Trump's emphasis on 'U.S. oil companies entering Venezuela' and 'raising funds for governance and national reconstruction' foreshadows the possibility of improving Venezuelan oil supply," adding, "While geopolitical tension will expand short-term volatility in international oil prices, in the long run international oil prices are expected to gradually decline and stabilize."

Min-kyung Shin, Hankyung.com reporter radio@hankyung.com