US claim on Venezuelan oil reserves is a deliberate red cape to a bull

The US claim on Venezuelan oil reserves is being framed as a bold move by President Donald Trump, who claims to secure majority control of over 65 billion barrels of proven oil reserves in the country at no cost to American taxpayers. However, this plan, reportedly involving the Office of Strategic Capital and Venezuelan investor Alejandro Betancourt, aims to extract 1.5 million barrels per day from various fields in Venezuela over a 25-year period for $100 billion investment.

In return, Venezuela would receive an estimated $209 billion in taxes, or about $19 per barrel at a hypothetical oil price of $65. Despite rumors of Venezuela possibly leaving Opec, following the UAE's departure, the proposal has several issues. The Office of Strategic Capital lacks the legal authority to acquire equity stakes in projects, and international companies may be hesitant to re-enter Venezuela.

More critically, granting foreign ownership of oil reserves contradicts Venezuela's constitution and could lead to the return of Chavismo, further fueling anti-US sentiment. The country's oil reserves were initially exploited by foreign companies in the early 20th century, leading to nationalization and privatization cycles. While Venezuela's output has recovered to about 1.1-1.2 million barrels per day, it remains below its former Opec quota of two million bpd.

Achieving higher output would take years and significant investment, making it unlikely to benefit the US in the short term. Instead, normal commercial negotiations with Western oil companies already active in Venezuela may prove more effective.