North American oil prices climbed by more than one per cent on Monday following the upheaval in Venezuela over the weekend, while stock prices of some large Canadian oil and gas companies have fallen.
A barrel of West Texas Intermediate, the North American benchmark, was trading about 1.5 per cent higher by midday, up nearly $1 to just over $58 US. Prices remain relatively cheap and are about $15 lower than compared to one year ago.
Meanwhile, several Canadian oil and gas companies are taking a hit to their stock price. The Toronto Stock Exchange’s energy index was down about 4.5 per cent by midday Monday.
Shares of the largest oil and gas companies in the country are trading lower, including Suncor Energy at about four per cent, while Cenovus Energy and Canadian Natural Resources Ltd. dropped about seven per cent.
Venezuela produces a heavy crude, which is similar to the type of oil that is mostly produced in Western Canada.
“Everybody is worried about how Venezuela will be able to increase its oil and natural gas production, because they have significant amounts of oil reserves, especially similar to what Canada has,” said Barry Schwartz, chief investment officer at Baskin Wealth Management.
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Though stocks of Canadian energy companies are down, Schwartz said it’s likely an overreaction, noting it will likely take years to rebuild Venezuela’s energy sector infrastructure before production could noticeably increase.
“It’s oil that has to be transported and refined. It’s expensive stuff to get out of the ground. But you can see the longevity of those reserves and the value of them,” he said.
The weekend removal of President Nicolas Maduro is impacting oil markets, because the country has some of the largest oil reserves around the world.
Once a major producer, Venezuela only pumped about 900,000 barrels per day out of the ground last year, following many years of declining investment because of sanctions and failed government policies.
At its peak, Venezuela produced 3.7 million barrels per day in 1970.
Overall, the Toronto Stock Exchange and North American markets all rose in value Monday.
