Maybe it is too soon to know which way the wind blows, but the end of Hugo Chavez is certainly an event for the international oil industry. Uncertainty abounds the Venezuelan oil sector, a country with the worlds 18 percent proven oil reserves as per latest BP estimates.
Why are the aftereffects vague? During his reign oil sector had major setbacks where production fell sharply and Chavez nationalized many foreign-run oil fields.
Although with minimalist chances, a political insatiability in the OPEC member state after the death of the premier could directly affect exports and thus oil prices. Moreover the country is also solely dependant on oil revenues, so hopes are crushed if the exports dwindle with which it imports other petroleum products.
On the other hand, with a more liberal government, production could bolster with opening up of the oil sector to foreign investment.
However, one major risk that a specialist at Citi Futures Perspective points out is how many foreign firms won be willing to invest as the country has seen many periods where foreign investment was hailed and many times when the governments had rejected the same due to the binding terms.
On the whole, many analysts believe that the uncertainty in Venezuela will likely have a short term rise in the oil prices with nothing significant in the longer term.
Besides this recent occurring, the average crude oil prices have fallen by 2.7 percent month-on-month in February 2013. From what it looks like, prices have been sort of stable during November and December with average price of Brent crude oil prices standing at 109 dollars and 109.5 dollars a barrel, respectively.
Prices in January 2013 really shot up as the US averted the deadly fiscal cliff and Eurozone did not announce any defaults. Prices in February can be referred to as some kind of correction in the exaggerated optimism, as the political instability in Italy toughened and the news about dwindling Chinese manufacturing echoed through the oil sector. All these factors, together with the looming cut in US budget likely have a restraining impact on prices in the short term.