Michael Burry, renowned for his role in "The Big Short," has brought his investment in Venezuelan oil back into the spotlight.
The investor revealed he has owned shares in Valero Energy since 2020, seeing the investment as increasingly promising due to the U.S. taking a more active role in reviving Venezuela's oil industry.
"Realize that many Gulf Coast refineries were purpose-built for Venezuelan heavy crude," Burry wrote in a blog post on Substack, "so they have been running with suboptimal feedstock for years. This will, in time, produce better margins across jet fuel, asphalt, and diesel. I have owned Valero since 2020, and I am more resolved to holding it longer after this weekend."
His remarks followed President Donald Trump's encouragement for U.S. oil companies to invest in Venezuela, post the overthrow of President Nicolás Maduro. Venezuela boasts the largest confirmed crude oil reserves globally, with its oil known to be particularly heavy and sulfur-rich, compatible with only a select number of refineries equipped to handle such feedstock efficiently.
Burry highlighted Valero for its capability to process heavy crude, but suggested that smaller refiners like PBF Energy and HF Sinclair could also benefit, even if Venezuelan oil is reintroduced gradually. A significant increase in exports could take years to materialize.
Wall Street analysts view Valero as the primary beneficiary, should Venezuelan supply see a boost, which caused its stock to climb about 10% on Monday.
The potential extends beyond refining, as Venezuela's oil infrastructure has suffered from years of neglect. This deterioration presents opportunities for U.S. oilfield services firms if widespread rehabilitation efforts commence, Burry noted.
Burry mentioned owning Halliburton stocks, and sees potential upside for companies like Schlumberger and Baker Hughes in aiding the reconstruction of pipelines and refineries.
"Venezuelan pipelines and refineries are old and in disrepair. This work will go to U.S. contractors," he stated. "Chevron is already there. Exxon and others have been litigating claims for decades and might see some justice soon if the U.S. effectively manages Venezuela as some suggest. I own Halliburton, and may consider purchasing more shares or LEAPs."
LEAPs, or long-term equity anticipation securities, are options with extended expirations potentially surpassing one year.