Canadian Oil Stocks Sink by 7% as Venezuela Chaos Sparks Market Shock After US Ousts Maduro

Canadian energy stocks fell sharply on Monday as investors digested the fallout from Venezuela's political upheaval, even as North American oil prices edged higher.

According to a report by CBC News, the Toronto Stock Exchange's energy index was down about 4.5% by midday before recovering to finish the session around 3.5% lower. The decline came despite firmer oil prices, with West Texas Intermediate (WTI) crude ending the day 1.7% higher at just over $58 (£46) a barrel.

The divergence, analysts say, reflects a concern specific to Canadian producers: that a shake-up in Venezuela could eventually restore supplies of heavy crude, a grade that competes most directly with oil produced in Western Canada.

Producers Fall as Markets Reopen After Venezuela Developments

In early trading, several of Canada's largest oil and gas companies were hit.

CBC reported that Suncor Energy fell about 4%, while Cenovus Energy and Canadian Natural Resources each dropped roughly 7% before recovering some of their losses later in the day.

A separate report by Yahoo Finance Canada said the sell-off extended across major producers including Suncor, Imperial Oil, Cenovus and Canadian Natural Resources, while shares of large US oil companies moved in the opposite direction.

Yahoo also highlighted weakness in the widely followed iShares S&P/TSX Capped Energy Index ETF, which it said fell as much as 6.3% intraday before closing down 3.43%.

Why Venezuela Matters to Canadian Heavy Crude

Venezuela's oil sector has long been central to discussions about global heavy crude supply. Venezuela produces a heavy crude similar to the type of oil mostly produced in Western Canada, which helps explain why markets quickly focused on competitive pressures.

Barry Schwartz, chief investment officer at Baskin Wealth Management, told CBC that investors are worried about how Venezuela could eventually increase oil and gas production, given the scale of its reserves.

He cautioned, however, that the market reaction may be exaggerated because rebuilding Venezuela's energy infrastructure would likely take years before production could rise meaningfully.

Venezuela produced about 900,000 barrels per day last year after years of declining investment linked to sanctions and policy failures, compared with a peak of 3.7 million barrels per day in 1970.

Analysts Say Recovery Would Take Time and Billions in Investment

Yahoo Finance Canada framed the market reaction as a response to the possibility that the United States could gain influence over Venezuela's battered heavy oil industry following the reported capture of President Nicolás Maduro by US forces.

In a note cited by Yahoo, RBC Capital Markets analyst Greg Pardy described the development as a longer-term structural risk for oil prices in general, and for Canada's heavy oil export markets in particular. At the same time, he argued that restoring Venezuelan production to historic levels would require years of investment, estimating that the country would need annual spending of around $10 billion (£8 billion) to move back towards output of roughly three million barrels per day, alongside a stable security environment.

Pardy also said that full sanctions relief could unlock several hundred thousand barrels per day of Venezuelan output over the next year, though he expects the discount on Canadian heavy crude to remain relatively contained compared with the US benchmark.

The WCS Discount and Pipeline Geography

One reason investors are sensitive to developments in Venezuela is the pricing relationship between Western Canadian Select (WCS) and WTI.

Yahoo explained that WCS typically trades at a discount because it is a heavier grade and because of transportation costs and other structural factors. It added that the start-up of the Trans Mountain Pipeline Expansion Project last summer has tightened that discount to its narrowest range in more than a decade.

Oil market researcher Rory Johnston, founder of Commodity Context, told Yahoo that much of Canada's crude is consumed in the US Midwest via pipeline, while Venezuelan oil would more directly compete in the US Gulf Coast if flows resumed.

He also argued that reconfiguring refineries to handle different foreign grades would be extremely costly, potentially running into tens of billions of dollars (tens of billions of pounds).

Johnston added that even if Venezuela's resources are unquestioned, it could take $50 billion to $100 billion (£40 billion to £80 billion) and many years of stability before investors are willing to fully commit to rebuilding the sector.

A Sharp Jolt, But Not a Final Verdict

The sell-off highlights how quickly geopolitical shocks can hit Canadian energy equities, particularly when heavy crude supply is involved. However, both CBC and Yahoo emphasise that a Venezuelan oil revival would be a long-term process, not an immediate shift.

For now, Canadian stocks appear to be reacting to uncertainty, while oil prices themselves continue to reflect a broader mix of global supply and demand forces.