Commodities

Return of US oil sanctions on Venezuela to hit revenue, fuel imports

Published

12 months ago

January 31, 2024

Return of US oil sanctions on Venezuela to hit revenue, fuel imports

By Marianna Parraga and Mayela Armas

HOUSTON/CARACAS (Reuters) – A reimposition of U.S. sanctions on Venezuela’s oil and gas sectors would hurt the OPEC country’s ability to collect cash from its oil exports, crimp new energy investments and raise the risks of domestic fuel scarcity, analysts and executives said.

Washington this week ordered a wind down of all business transactions between U.S entities and Venezuela’s state miner Minerven, and said it would unwind in April its easing of energy sanctions if President Nicolas Maduro’s administration does not stick to an agreement signed last year to accept conditions for a fair presidential election.

The U.S. is increasing its pressure since the South American country’s top court last week upheld a ban blocking the leading opposition hopeful, Maria Corina Machado, from the election.

The U.S., which first imposed oil sanctions on Venezuela in 2019, had granted sanctions relief for the OPEC member country in October in recognition of the election deal.

As a result of easing sanctions, Venezuela was expected to grow its total oil revenue to as much as $20 billion this year from some $12 billion in 2023, according to Caracas-based consultancy Ecoanalitica. Larger exports of crude and petrochemicals to cash-paying customers in countries from the U.S. to India were behind its forecast.

“Price discounts on Venezuela’s crude had reduced a lot and cashing sales proceeds became easier for state company PDVSA. That was helping Maduro,” said Francisco Monaldi, director of the Latin American Energy Program at Rice University’s Baker Institute.

“If the license is withdrawn in April, the proceeds will be reduced again and the scenarios of strong economic growth and a competitive election will fade,” he added.

Risks of a new bout of acute fuel scarcity also are poised to increase, experts said.

Even if Washington continues authorizations for debt repayment deals to Chevron (NYSE:), Eni, Repsol (OTC:) and Maurel & Prom to avoid a total break with Venezuela, that might not provide sustainable investment to expand output.

“Specific licenses to one or two companies are not going to be very beneficial as a return of investment to Venezuela,” said Ali Moshiri, CEO of Amos Global Energy, which has interests in the South American country.

“That is not really going to move the needle for Venezuela’s oil sector to increase production significantly,” he added.

LOST EFFORT?

The U.S. sanction easing, which began in November 2022 with a special license to Chevron, marked a big change for the South American country’s coffers.

PDVSA since 2019 had been forced to switch most of its oil trading to swaps and funnel sales through intermediaries because customers did not want to be exposed to sanctions.

Oil exports by PDVSA and its joint venture partners rose almost 13% to an average 700,000 barrels per day (bpd) last year, tanker tracking data showed, while the country’s crude output grew 9% to 783,000 bpd. The company reestablished relationships with some of its former key clients.

The relaxation increased oil revenue, boosting Venezuela’s gross domestic product by 5% in 2023. It also paved the way for Venezuela to plan for an expansion of public spending for the first time in years to woo voters.

Venezuela’s oil minister Pedro Tellechea on Tuesday said the country was prepared to counter a return of sanctions and warned that the U.S. could also suffer from fewer Venezuelan oil exports.

But his message did little to calm companies that were planning purchases of Venezuelan oil and partnerships for energy projects in Venezuela, according to sources.

Commodities

US oil and gas rig count falls to lowest since Dec 2021, Baker Hughes says

Published

15 hours ago

January 26, 2025

By Scott DiSavino

(Reuters) – U.S. energy firms this week cut the number of oil and rigs operating for a third week in a row to the lowest since December 2021, energy services firm Baker Hughes (NASDAQ:) said in its closely followed report on Friday.

The oil and gas rig count, an early indicator of future output, fell by four to 576 in the week to Jan. 24.

Baker Hughes said this week’s decline puts the total rig count down 45, or 7% below this time last year.

Baker Hughes said oil rigs fell by six to 472 this week, their lowest since December 2021, while gas rigs rose by one to 99.

In the Permian Basin in West Texas and eastern New Mexico, the nation’s biggest oil-producing shale basin, the rig count fell by six in the week to 298, the lowest since February 2022.

That six-rig decline in the Permian was the biggest weekly drop since August 2023.

The oil and gas rig count declined by about 5% in 2024 and 20% in 2023 as lower U.S. oil and gas prices over the past couple of years prompted energy firms to focus more on paying down debt and boosting shareholder returns rather than raising output.

Even though analysts forecast U.S. spot crude prices could decline for a third year in a row in 2025, the U.S. Energy Information Administration (EIA) projected crude output would rise from a record 13.2 million barrels per day (bpd) in 2024 to around 13.6 million bpd in 2025.

On the gas side, the EIA projected a 43% increase in spot gas prices in 2025 would prompt producers to boost drilling activity this year after a 14% price drop in 2024 caused several energy firms to cut output for the first time since the COVID-19 pandemic reduced demand for the fuel in 2020. [NGAS/POLL]

The EIA projected gas output would rise to 104.5 billion cubic feet per day (bcfd) in 2025, up from 103.1 bcfd in 2024 and a record 103.6 bcfd in 2023.

Commodities

Oil prices settle pennies higher, down for week as Trump touts energy policy

Published

15 hours ago

January 26, 2025

By Georgina McCartney

HOUSTON (Reuters) -Oil prices settled slightly higher on Friday but posted a weekly decline, ending four straight weeks of gains, after U.S. President Donald Trump announced sweeping plans to boost domestic production while demanding that OPEC move to lower crude prices.

futures settled up 21 cents, or 0.27%, to $78.50 a barrel. U.S. West Texas Intermediate crude (WTI) settled up 4 cents, or 0.05%, to $74.66.

Brent has lost 2.8% this week while WTI was down 4.1%.

Trump on Friday reiterated his call for the Organization of the Petroleum Exporting Countries to cut oil prices to hurt oil-rich Russia’s finances and help bring an end to the war in Ukraine.

“One way to stop it quickly is for OPEC to stop making so much money and drop the price of oil … that war will stop right away,” Trump said as he landed in North Carolina to view storm damage.

The threat of harsh U.S. sanctions on Russia and Iran, which are key oil producers, could undermine Trump’s goal of lowering energy costs, StoneX analyst Alex Hodes said in a note on Friday.

“Trump knows this and has leaned on OPEC to cover the void that these will create,” Hodes said.

On Thursday, Trump told the World Economic Forum he would demand that OPEC and its de facto leader, Saudi Arabia, bring down crude prices.

OPEC+, which includes Russia, has yet to react, with delegates from the group pointing to a plan already in place to start raising oil output from April.

“I don’t really expect OPEC will change policy unless there is a change in fundamentals,” UBS commodities analyst Giovanni Staunovo said. “Markets will be relatively muted until we get more clarity on sanctions policy and tariffs.”

TARIFFS

Chevron (NYSE:) said on Friday it had started production at a $48 billion expansion of the giant Tengiz oilfield, which will bring its output to around 1% of global crude supply, and could further pressure OPEC’s efforts in the last few years to limit production.

Trump declared a national energy emergency on Monday, rolling back environmental restrictions on energy infrastructure as part of his plans to maximize domestic oil and gas production.

These rollbacks could support oil demand but have the potential to exacerbate oversupply, said Nikos Tzabouras, senior market specialist at trading platform Tradu.

Trump’s policies so far have largely followed predictions on the supply side, including cutting red tape to promote domestic supply growth, according to StoneX’s Hodes. However “the lower hanging fruit for growth has already been picked.”

The U.S. president vowed on Wednesday to hit the European Union with tariffs and impose 25% tariffs on Canada and Mexico. He also said his administration was considering a 10% punitive duty on China.

As attention shifts to a possible February timeline for new tariffs, caution is likely to persist in the market, given potential negative implications for global growth and oil demand prospects, said Yeap Jun Rong, a market strategist at IG. Traders expect oil prices to range between $76.50 and $78 a barrel, he added.

While bullish catalysts such as a significant drawdown in stocks are providing temporary positive swings, an over-supplied global market and projections of ailing Chinese demand continue to weigh on crude futures, said Priyanka Sachdeva, senior market analyst at brokerage Phillip Nova.

U.S. crude inventories last week hit their lowest level since March 2022, the U.S. Energy Information Administration said. [EIA/S]

Commodities

US oil and gas rig count falls to lowest since Dec 2021, Baker Hughes says

Published

2 days ago

January 25, 2025

By Scott DiSavino

The oil and gas rig count, an early indicator of future output, fell by four to 576 in the week to Jan. 24.

Baker Hughes said this week’s decline puts the total rig count down 45, or 7% below this time last year.

Baker Hughes said oil rigs fell by six to 472 this week, their lowest since December 2021, while gas rigs rose by one to 99.

In the Permian Basin in West Texas and eastern New Mexico, the nation’s biggest oil-producing shale basin, the rig count fell by six in the week to 298, the lowest since February 2022.

That six-rig decline in the Permian was the biggest weekly drop since August 2023.

The EIA projected gas output would rise to 104.5 billion cubic feet per day (bcfd) in 2025, up from 103.1 bcfd in 2024 and a record 103.6 bcfd in 2023.