Kathmandu— The United States has entered into a significant oil deal with Venezuela that aims to increase its control over more than 65 billion barrels of Venezuelan proven oil reserves. Announced by President Donald Trump on August 28, the deal is expected to bolster US oil reserves and potentially support thousands of jobs in the country. However, analysts caution that while the agreement could improve market sentiment in the long term, it will not likely lower crude or gas prices in the near future due to practical extraction challenges.

Deal Details

The deal involves a joint venture between the US and North American Blue Energy Partners (NABEP), owned by Venezuelan businessman Alejandro Betancourt. The Pentagon’s Office of Strategic Capital will hold a 35 percent stake in NABEP, which is already the second-largest operator in Venezuela after Chevron. This arrangement aims to facilitate easier operation from Venezuela despite ongoing sanctions.

Impact on Prices

Despite Trump's claims that the deal would lower gas prices for Americans, analysts argue that the practical difficulties of extracting and refining Venezuelan crude will delay any significant impact on fuel costs. Johannes Rauball, a senior analyst at Kpler, noted that US crude prices have risen since the announcement due to geopolitical risks and supply disruptions in the Middle East.

Global Oil Market Dynamics

The closure of the Strait of Hormuz has significantly disrupted global oil markets. While the deal with Venezuela is expected to increase overall availability of crude over time, it cannot replace the lost supply from Gulf producers due to differences in oil grades and refining capabilities. Frederic Schneider, a nonresident senior fellow at the Middle East Council on Global Affairs, emphasized that Venezuelan heavy, sour crude competes with other heavy imports rather than substituting for lighter Gulf oil.

Potential Beneficiaries

US oil companies are likely to benefit most from this deal. Shares in Chevron rose after the announcement, and Energy Secretary Chris Wright expects additional deals with international companies like Eni and ONGC to boost Venezuela’s crude production further. However, Schneider doubts many other companies will rush into Venezuelan investments due to high risks and uncertain demand forecasts.

(With inputs from Al Jazeera)

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Originally published on abcnews.com.np.