The surprising news of U.S. intervention in Venezuela led to a not-so-surprising market overreaction: a sharp selloff of Canadian oil and gas stocks over fears that Venezuelan oil will soon flood the market and replace Canadian oil.¹

But there is a difference between a shocking headline and a workable supply chain. The good news for investors in Canadian energy stocks is that while the idea that Venezuelan heavy crude will supplant Canadian oil sounds plausible in the abstract, it runs into practical limits in the real world.

Let’s look at why concerns that the United States will stop buying Canadian oil are overblown and why there is still opportunity to be had in Canadian energy.

Why the Venezuela Shock Got Ahead of the Reality

Reaction to the news from Venezuela was swift because of concerns the United States could replace Canadian heavy crude with heavy crude from untapped Venezuelan deposits. According to Canada Energy Regulator, 95.7% of our crude is exported to the United States, hence such a shift would have serious consequences for the Canadian energy sector.²

However, in the near term, the percentage of Canadian oil that could realistically be displaced is limited, pegged at just 10% by Charles St-Arnaud, chief economist at Service Credit Union and former Bank of Canada economist. The reasoning being only certain U.S. regions are positioned to take meaningful volumes of Venezuelan imports without a major re-plumbing of the existing refinement system. The refineries best suited to heavy crude tend to be tied into existing North American flows and are already supplied by Canadian pipelines.

Time is also a constraint. Venezuela has immense untapped oil reserves, but reserves are not the same thing as reliable production and exports. Years of underinvestment, operational challenges, and international sanctions mean that even optimistic scenarios involve multi-year rebuilding and billions of dollars investment in equipment, upgraded facilities, and sustained maintenance.³

While analysts debate how quickly Venezuela’s output could rise and prove a rival to Canadian heavy crude, it’s clear that the broader rebuild of Venezuela’s oil infrastructure is a multi-year, multi-billion-dollar project and not a quick fix. Canada remains the United States’ largest foreign supplier of crude, with a relationship built on proximity, scale, and decades of integration. These facts suggest that short-term panic in the immediate aftermath of the U.S. action in Venezuela may have outpaced the near-term realities.

How Active Covered Calls Can Benefit from Volatility

For average investors, one takeaway from recent events in Venezuela is that in the oil and gas sector, uncertainty tends to show up first in volatility.

When markets are jumpy, the pricing of risk changes, and that can ripple through to strategies designed around volatility, such as covered calls. The basic concept is straightforward: a portfolio holds equities and sells call options on those holdings, collecting premiums that can contribute to cash flow. The trade-off is equally straightforward: if the underlying stocks rally sharply, upside participation may be reduced because the calls can be exercised above a certain level, and if stocks fall, the option premium may not fully offset the decline. In other words, it is not a shield against losses, and it is not a promise of smoother returns. Rather, it is a different way of viewing risk and return, and one heavily dependent on market conditions.

In a market where energy prices can swing on policy shifts and geopolitical surprises, covered call products are positioned around the idea that volatility itself can be a source of premium income, while also acknowledging the trade-offs that come with capping some upside. The structure is designed to be systematic in its equity exposure while using active decision-making in how calls are written, rather than applying a rigid, one-size-fits-all approach regardless of conditions.

OILY: Canadian Energy ETF

Want to fuel your portfolio with Canadian energy? The Evolve Canadian Energy Enhanced Yield Index Fund (OILY ETF) offers investors exposure to the Solactive Canada Energy Top 10 Index, aiming for a 1.25 multiple of the index’s performance through a covered call option writing program at the discretion of the Manager.

Learn more about the OILY ETF—visit the fund page today.

 

ENDNOTES

1. Khan, A., “Canadian oil stocks slip is a ‘massive overreaction’ to Venezuela: Eric Nuttall” BNN Bloomberg, January 05, 2026; https://www.bnnbloomberg.ca/business/2026/01/05/canadian-oil-stocks-slip-is-a-massive-overreaction-to-venezuela/

2. “Market Snapshot: Overview of 2024 Canada-U.S. Energy Trade,” Canada Energy Regulator, July 9, 2025; https://www.cer-rec.gc.ca/en/data-analysis/energy-markets/market-snapshots/2025/market-snapshot-overview-of-2024-canada-us-energy-trade.html
3. Khan, A., “Only 10% of Canadian oil likely to be replaced by Venezuela in short term, says analyst,” BNN Bloomberg, January 07, 2026; https://www.bnnbloomberg.ca/business/2026/01/07/only-10-of-canadian-oil-could-be-replaced-by-venezuela-in-short-term-says-analyst/

 

Source: GettyImages Credit: Evgeny Gromov

Disclaimers:

Published February 27, 2026

Evolve Funds Group Inc. is the investment fund manager and portfolio manager. Evolve Canadian Energy Enhanced Yield Index Fund (“OILY”) is offered by Evolve Funds Group Inc., and distributed through authorized dealers.

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