Oil up 1% as market assesses Venezuela upheaval

Oil prices jumped by about 1% on Monday as traders assessed the possible impact on oil flows from the U.S. capture of President Nicolas Maduro of Venezuela, home of the biggest global oil reserves.

Brent crude futures were up 55 cents, or 0.9%, at $61.30 a barrel U.S. West Texas Intermediate crude gained 64 cents, or 1.1%, to $57.96.

The benchmarks have crept in and out of negative territory in European trading as markets digested news that the U.S. had captured Venezuela’s leader and that Washington would take control of the OPEC member, crude exports of which had been under a U.S. embargo that remains in place.

In a global market with plentiful oil supply, analysts said that any further disruption to Venezuela’s exports would have little immediate impact on prices.

Venezuelan oil output has plummeted in recent decades, curbed by mismanagement and a lack of foreign investment after the nationalisation of oil operations in the 2000s.

Output averaged about 1 million barrels per day last year, equating to about 1% of global production. Venezuela’s acting president  offered on Sunday to cooperate with the United States.

“This reduces the risk for an extended embargo on Venezuelan oil exports, with oil potentially flowing freely out of Venezuela before too long,” said SEB analysts. Shares of U.S. energy companies rallied. Others were more hesitant.

“The oil market is faced with a surplus unrelated to Venezuela. We can see why the market may focus on the bearish angle of more barrels out of Venezuela; we just do not see that happening quickly,” said Bernstein analysts.

Trump also raised the possibility of further U.S. interventions, suggesting Colombia and Mexico could face military action if they did not reduce the flow of illicit drugs. Analysts are also awaiting Iranian reaction to Trump’s threat on Friday to intervene in a crackdown on protests in the OPEC producer.

Elsewhere, the Organization of the Petroleum Exporting Countries and its allies decided to maintain their output on Sunday.