Michael Burry’s big play off the U.S.-Venezuela situation, which the investor has held for years

Michael Burry, the investor famous for his bet against the housing market in “The Big Short,” is making headlines once again with his quiet bet on Venezuelan oil. Burry revealed that he has owned Valero Energy since 2020, a move he believes will pay off as the U.S. becomes more involved in revitalizing Venezuela’s oil industry.

In a recent blog post on Substack, Burry explained that many Gulf Coast refineries were specifically designed to process Venezuelan heavy crude. However, due to the political and economic turmoil in Venezuela, these refineries have been operating with suboptimal feedstock for years. As the situation in Venezuela improves, Burry expects better margins across various products such as jet fuel, asphalt, and diesel.

President Donald Trump’s call for U.S. oil companies to invest in Venezuela following the overthrow of President Nicolás Maduro has also caught Burry’s attention. Venezuela, as a founding member of OPEC, holds the largest proven crude oil reserves globally. However, the country’s oil is notoriously heavy and sulfur-laden, requiring specialized refineries to process it efficiently.

Valero, with its ability to process heavy crude, is seen as a standout performer in this scenario. Burry also pointed out that smaller refiners like PBF Energy and HF Sinclair could benefit from an increase in Venezuelan oil supply, albeit gradually. Analysts on Wall Street have also highlighted Valero as a significant beneficiary, with the company’s shares jumping about 10% following the news.

Burry sees potential opportunities beyond refining in Venezuela’s oil sector. The country’s oil infrastructure has suffered from decades of underinvestment, creating a potential demand for U.S. oilfield services companies like Halliburton, Schlumberger, and Baker Hughes. These companies could play a crucial role in rebuilding pipelines and refineries in Venezuela.

“Venezuelan pipelines and refineries are old and in disrepair. This work will go to U.S. contractors,” Burry stated. He mentioned that Chevron is already present in Venezuela, while other major oil companies like Exxon have been involved in legal battles over claims in the country. Burry disclosed that he owns shares in Halliburton and may consider purchasing more shares or LEAPs (long-term equity anticipation securities) in the future.

As the situation in Venezuela evolves, Burry’s investments in Valero and other related companies could prove to be lucrative. With the potential for increased Venezuelan oil exports and infrastructure rehabilitation, the U.S. oil industry stands to benefit significantly from this opportunity.