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Oil Markets Are Ignoring Geopolitical Risk

The markets are ignoring rising geopolitical tensions on multiple fronts right now–from Israel and the Red Sea to Venezuela and Guyana. Some 8.8 million barrels of oil per day are shipped through a vital Red Sea choke point, and for Guyana (not to mention Exxon, Hess, and Chinese CNOOC), 1.2 million bpd of new discoveries (by 2027) are at stake. 

The reality that is dictating the markets right now, instead, is OPEC’s failure to control prices, rising U.S. oil production, and concerns over Chinese oil demand. As the market focuses on U.S. output numbers, observers might rightly wonder if there would even be a significant price reaction to a Venezuelan invasion of oil-rich Guyana’s territory. 

Venezuela …

Just as it was hard to believe that Russia would not invade Ukraine, many observers feel that Venezuela will not invade Guyana and attempt to take Essequibo by force. It is a brave call to make at a time when Nicolas Maduro is unpopular and desperate and the idea of Venezuela as the rightful owner of Essequibo is much more popular than he is. Even with its devastated military, Venezuela could easily overcome Guyana’s meager defense forces to annex oil-rich Essequibo. 

On Wednesday, Maduro raised a fervor, pledging to hand out oil exploration permits for the offshore bounty housing Exxon’s string of huge discoveries. Later that same day, he unveiled a new map of Venezuela that included Essequibo, appointed…

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