North American crude oil prices surged over one percent on Monday in response to the recent turmoil in Venezuela, while the stock values of several major Canadian oil and gas companies experienced a drop at the start of trading. The West Texas Intermediate, the primary North American benchmark, concluded the day with a 1.7 percent increase, gaining approximately $1 to surpass $58 US. Despite the rise, prices are still relatively low, standing $15 lower compared to a year ago.
Conversely, numerous Canadian oil and gas firms witnessed declines in their stock prices. The energy index of the Toronto Stock Exchange plummeted around 4.5 percent by midday Monday, recovering slightly to finish the day down by about 3.5 percent. Notable energy giants in the country, including Suncor Energy with a decrease of about four percent, and Cenovus Energy and Canadian Natural Resources Ltd. sliding around seven percent initially, managed to recoup some losses later in the day.
Venezuela, a producer of heavy crude similar to Western Canada’s oil, is under scrutiny for its ability to boost oil and natural gas output. Barry Schwartz, the Chief Investment Officer at Baskin Wealth Management, expressed concerns about Venezuela’s potential to enhance production, given its substantial oil reserves comparable to Canada’s.
While the stocks of Canadian energy companies faced declines, Schwartz suggested that the market reaction may be excessive, emphasizing the significant time required to reconstruct Venezuela’s energy sector infrastructure before witnessing a noticeable production increase. The removal of Venezuelan President Nicolás Maduro over the weekend is impacting global oil markets due to the country’s vast oil reserves.
Formerly a significant oil producer, Venezuela’s output dwindled to about 900,000 barrels per day last year following years of decreased investment due to sanctions and ineffective government policies. In 1970, Venezuela reached a peak production of 3.7 million barrels per day. Overall, the Toronto Stock Exchange and North American markets observed an increase in value on Monday.