U.S. refineries could be a big beneficiary of Venezuelan oil, says Jim Cramer
Speakers
Jim Cramer
— Host, Mad Money
Summary
Jim Cramer discusses the market impact of U.S. involvement in Venezuela following the overthrow of Nicolas Maduro. He says the headline is dramatic but likely not a major long-term business catalyst, and warns investors against chasing Venezuela-related energy stocks that spiked. He flags U.S. refiners, especially Valero, Phillips 66, and Marathon Petroleum, as potential beneficiaries if Venezuelan heavy crude can be redirected to the Gulf, while Chevron and oil servicers are more limited or speculative plays. His conclusion is that most of the easy gains have already been captured.
- Cramer's broader theme is owning long-term stocks rather than trading headlines.
- He says the Maduro overthrow is a big news story but not necessarily a big long-term business story.
- U.S. refiners with heavy-crude capacity, especially Valero, Phillips 66, and Marathon Petroleum, could benefit if Venezuelan oil is diverted to the Gulf.
- Chevron has existing Venezuelan exposure but any production increase would be small for the company.
- Halliburton, KBR, and SLB could be potential winners if Venezuela's oil infrastructure is rebuilt, though this is speculative.
- Venezuela-related energy stocks opened too high and may be overinflated; Cramer expects losses for buyers at those levels.
- Cramer concludes there is little left to gain from the Venezuela trade because buyers have already captured the move.
Ideas
Chevron has limited Venezuelan production upside.
Chevron already has a long-held Venezuelan oil interest and could potentially increase production above the roughly 100,000 barrels per day it currently pumps from Venezuela if the political situation improves, making it relatively insulated among Venezuela-related energy names. However, Cramer notes that even doubling output would be a drop in the bucket for Chevron, so the upside is limited.
Refiners may benefit from Venezuelan heavy crude.
U.S. refiners, especially Valero, may be major beneficiaries if Venezuelan heavy crude is diverted to the U.S. Gulf, because they still have refineries that can process heavy crude, which is what Venezuela produces. Phillips 66 and Marathon Petroleum could also be big winners, but the thesis is conditional on whether that oil can be redirected from China and on Venezuela's broken infrastructure. Cramer sees refiners as among the few potential winners even though the broader Venezuela trade is difficult and the stocks already jumped.
Oil servicers could win Venezuela rebuild contracts.
Venezuela's oil infrastructure is a mess and will need extensive rebuilding; Halliburton, KBR, and SLB had major Iraq contracts in a similar situation and could be considered potential winners if major rebuilding contracts materialize. Cramer treats this as speculation, especially since the stocks already surged.
