The Suncor oil refinery on Edmonton's east side on April 14, 2025.Kaeden Dupre/The Globe and Mail
If you’re worried about the future of the Canadian energy sector after the United States grabbed control of Venezuelan oil production this week, consider a side-by-side comparison of two industry heavyweights – Calgary-based Suncor Energy Inc. SU-T and Houston-based Chevron Corp. CVX-N
Then, behold the advantages of the Canadian producer.
Okay, that might sound like a simplistic elbows-up response to a complex issue that involves everything from oil prices to refinery capacity to the ability of U.S. President Donald Trump to do whatever he wants.
But the case for Suncor has little to do with fuzzy national pride. Instead, it rests on attractive features such as stronger profitability, fatter margins and the fact that the oil market sorta shrugged over this latest geopolitical upheaval.
This week, though, investors weren’t so sure.
Mr. Trump’s ouster of Venezuelan leader Nicolás Maduro was the starting point for some serious uh-oh moments.
Don’t expect a big gush of Venezuelan oil onto world markets any time soon
Then, in a series of increasingly dictatorial announcements, Mr. Trump said the U.S. would take control of Venezuela’s oil industry “indefinitely” and send sanctioned oil to U.S. refineries on the Gulf Coast.
The stock market reflected the fear of Canadian crude getting sidelined, adding to concerns about a global glut, which has driven the price of oil to four-year lows.
The S&P/TSX Composite Energy Sector slumped 2.3 per cent on Monday, and fell further on Tuesday and Wednesday before regaining some ground on Thursday.
Words uttered in defence of the sector sounded a bit desperate.
“Canadian oil will be competitive because it is low risk,” Prime Minister Mark Carney told reporters in Paris earlier this week.
Is that enough to calm investors?
The case for Suncor runs deeper than reliability, which may explain why the share price has outperformed Chevron by 9 percentage points over the past year, and 110 percentage points over the past five years, including dividends.
Suncor’s return on equity, a measure of profitability, is 11.7 per cent. That’s considerably higher than Chevron’s 7.3 per cent ROE.
Similarly, Suncor’s profit margin – or earnings before interest, taxes, depreciation and amortization derived from revenue – is 30.6 per cent. Chevron’s EBITDA margin lags at 20 per cent, yet the stock trades at a premium valuation.
No doubt, U.S. control of Venezuela’s oil production should help Chevron, which has a long history in the country.
But early takes from analysts suggest that this is not exactly a game-changer, given the significant geopolitical and operational hurdles to ramping up profitable production when the price of oil is down nearly 20 per cent over the past year.
“While regime change may improve the operating environment, the path to meaningful investment and production growth remains uncertain, requiring a stable government, clear investment terms and multi-year infrastructure rebuilding,” Betty Jiang, an analyst at Barclays Capital, said in a note.
What’s more, the heavy oil that Venezuela produces will be shipped to U.S. refineries along the Gulf Coast, where there is excess capacity, rather than the Midwest refineries where most Canadian heavy crude is sent.
That won’t change.
“It’s an additional competitor to Canadian barrels. It’ll impact the price. But Canadian barrels will still be attractive and still flow,” John Auers, managing director of refining analytics at RBN Energy LLC, a Houston-based consultancy, said in an interview.
In the near-term, the 30 million to 50 million barrels of Venezuelan oil that Mr. Trump said will go to U.S. refineries could weigh further on oil prices.
Over the longer-term, a sustained increase in production within, say, three years could widen the discount of heavy crude by US$1 to US$2 a barrel, though Mr. Auers hasn’t finalized any official forecast yet.
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That’s not good news for Suncor, given that falling oil prices will squeeze profits. But it’s also not great for Chevron or other U.S. producers, which may require higher oil prices to encourage them to bet on Venezuela’s return.
The oil market has been taking the news from Venezuela in stride this week, offering more reassurance for investors that perhaps not a whole lot has changed.
West Texas Intermediate, the U.S. benchmark, is roughly unchanged since the U.S. overthrew Mr. Maduro. It traded at US$58.54 a barrel on Thursday afternoon, compared with US$57.32 a barrel on Jan. 2.
Western Canadian Select, the benchmark for Canadian heavy crude, is down 5.7 per cent over this period. That is hardly disastrous, given the glut, and could suggest that it’s business-as-usual for Canadian energy stocks.
Sure, Chevron has a lot going for it right now. But Suncor may be the better bet.