The global energy landscape experienced a dramatic upheaval recently following the U.S. military operation that led to the capture of Venezuela’s president, Nicolás Maduro. This bold geopolitical move, characterized by U.S. President Trump as a mission to liberate Venezuela's vast resources from "drug terrorism," has placed U.S.-Venezuela relations at a historic flashpoint. 

Trump’s subsequent vow to have American companies "take control" and "revitalize" Venezuela’s oil industry has sent shockwaves through the market. For investors, this scenario has suddenly placed a spotlight on energy companies with existing Venezuelan footprints, and, by extension, the energy exchange-traded funds (ETFs) that hold them, as markets weigh the potential for a major redistribution of global oil wealth.

The Geopolitical Impact on Energy Companies

The current crisis is a double-edged sword for energy giants. 

On one hand, U.S. control could grant American energy firms "privileged access" to the world's largest proven oil reserves, estimated at over 300 billion barrels. To this end, it is imperative to mention that currently, Chevron (CVX Quick QuoteCVX - Free Report) is the only U.S. oil major operating in Venezuela, while other U.S. oil giants like Exxon Mobil (XOM Quick QuoteXOM - Free Report) and ConocoPhillips (COP Quick QuoteCOP - Free Report) have billions of dollars in outstanding claims in relation to seized projects by the Venezuelan President.

Furthermore, Venezuelan heavy crude is considered an ideal feedstock for many complex refineries on the U.S. Gulf Coast, which were specifically engineered decades ago to process dense, high-sulfur (sour) oil, thereby offering a strategic supply source. U.S. energy majors, particularly the three mentioned above, thus stand at the forefront of this crisis, and a favorable political shift could pave the way for asset recovery and earn them new, lucrative operations. 

However, the reality of "controlling" this oil involves navigating a decimated infrastructure that requires an estimated $100 billion in investment, or may be even more, to fully recover. This investment would have to be made against a backdrop of relatively low global oil prices and considerable uncertainty over Venezuela’s legal and political future, factors that could deter U.S. energy companies from deploying capital aggressively.

What Do Analysts Expect?

In light of the current situation, industry experts remain divided on whether the United States can truly "control" Venezuelan oil in the near term and the resultant impact on U.S. energy companies.

For example, analysts from JP Morgan suggest that if the United States successfully integrates Venezuelan reserves, it could control nearly 30% of global oil, potentially stabilizing prices at historically lower ranges and reshaping the balance of power in international energy markets (as mentioned in a Fortune press release). 

In the same line of thought, analysts from Goldman Sachs believe that the scope for higher Venezuelan oil output in the long run, after the United States’ capture of the nation’s leader, may eventually pressure global crude prices (as cited in a Yahoo Finance report). 

On the contrary, many experts, including those at Rystad Energy, caution that oil majors might be "wary" of investing billions without absolute political stability and legal guarantees. They warn that meaningful increases in crude production to 3m barrels of oil a day would require 16 years of work and investments totaling $185 billion, due to the decrepit state of Venezuelan facilities and the risk of future political reversals (as cited in The Guardian). 

Thus, while the U.S. administration promises the crisis as a "gold mine" for its domestic firms, the immediate geopolitical gambit arising out of this crisis creates a high-stakes scenario where the potential for massive resource access is weighed against immense political, legal, and infrastructural risks, directly impacting the valuations and prospects of major energy firms.

Energy ETFs in the Spotlight

Given this volatile backdrop, as mentioned above, investors might be closely watching diversified Energy ETFs that provide exposure to the U.S. oil majors positioned for potential upside while mitigating the risk of any single company. Four such ETFs currently in focus are:

State Street Energy Select Sector SPDR ETF (XLE Quick QuoteXLE - Free Report)

This fund, with assets under management (AUM) worth $27.8 billion, is the largest energy ETF, offering exposure to 22 companies from the oil, gas and consumable fuel, energy equipment and services industries. Its top three holdings include XOM (23.66%), CVX (17.63%) and COP (7.14%), which have direct historical ties to Venezuela.

XLE has gained 11.1% over the past year. The fund charges 8 basis points (bps) as fees. It traded at a good volume of 94.93 million shares in the last trading session.

Vanguard Energy ETF (VDE Quick QuoteVDE - Free Report)

This fund, with assets worth $7 billion, provides exposure to 109 companies whose businesses are dominated by either of the following activities — the construction or provision of oil rigs, drilling equipment, and other energy-related service and equipment; or the exploration, production, marketing, refining, and/or transportation of oil and gas products. Its top three holdings include XOM (22.02%), CVX (14.89%) and COP (5.56%).

VDE has risen 10% over the past year. The fund charges 9 bps as fees. It traded at a volume of 1.5 million shares in the last trading session. 

iShares U.S. Energy ETF (IYE Quick QuoteIYE - Free Report)

This fund, with assets worth $1.17 billion, provides exposure to 39 U.S. companies that produce and distribute oil and gas. Its top three holdings include XOM (23.12%), CVX (16.38%) and COP (6.62%).

IYE has rallied 10.3% over the past year. The fund charges 38 bps as fees. It traded at a volume of 4.37 million shares in the last trading session. 

Fidelity MSCI Energy Index ETF (FENY Quick QuoteFENY - Free Report)

This fund, with assets worth $1.31 billion, provides exposure to 102 energy companies from the U.S. equity market. Its top three holdings include: XOM (21.90%), CVX (15.04%) and COP (5.70%).

FENY has gained 10.1% over the past year. The fund charges 8 bps as fees. It traded at a volume of 12.19 million shares in the last trading session.