Venezuela Bond Prices Soar as Investors Bet on Oil Production Boom
The US administration's plan to take control of Venezuela's oil reserves has sent prices for Venezuelan bonds soaring. The deal, which gives the US control of more than 65 Bbbl of proven reserves, is expected to drive a significant increase in production and put Venezuela's goal of 1.5 million bpd within reach.
Investors are already factoring in the prospect of higher crude production ahead of a debt restructuring that could top $200 billion. The plan has pushed prices for defaulted government and state oil company bonds to near a four-month high, with sovereign notes due in 2027 reaching 54 cents on the dollar.
Experts believe that private-sector investment plans are emerging, with Chevron planning to invest more than $7 billion over the next five years through its Venezuelan joint ventures. Eni is also planning a significant increase in Venezuelan oil production.
However, gains in Venezuelan bonds have been limited as creditors await a government debt report and accompanying macroeconomic analysis. Jefferies Financial Group estimates that Venezuelan production could potentially reach 2 MMbpd within five years if the agreement holds and President Donald Trump's call for $100 billion of oil investment comes to fruition.