Commodities
Return of US oil sanctions on Venezuela to hit revenue, fuel imports
© Reuters. FILE PHOTO: A general view of the headquarters of the Venezuelan oil company PDVSA in Caracas, Venezuela July 21, 2016. Picture taken July 21, 2016. REUTERS/Carlos Garcia Rawlins/File Photo
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“If the license is withdrawn in April, the proceeds will be reduced again and the scenarios of strong economic growth and a competitive election will fade,” he added.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.
By Enes Tunagur
(Reuters) -Oil prices fell on Friday as analysts continued to forecast a supply surplus in 2025 despite the OPEC+ decision to postpone planned supply increases and extend deep output cuts to the end of 2026.
futures were down 66 cents, or 0.9%, to $71.43 per barrel at 1128 GMT. U.S. West Texas Intermediate crude futures were down 65 cents, or 1%, to $67.65 per barrel.
For the week, Brent was on track to fall 2%, while WTI was on course for a 0.5% drop.
The Organization of the Petroleum Exporting Countries and its allies on Thursday pushed back the start of oil output rises by three months until April and extended the full unwinding of cuts by a year until the end of 2026.
The group, known as OPEC+ and responsible for about half of the world’s oil output, was planning to start unwinding cuts from October 2024, but a slowdown in global demand – especially in China – and rising output elsewhere have forced it to postpone the plan several times.
“The outcome of the latest meeting of OPEC+ members surprised us positively … The extension of the production cuts shows the group remains united and is still targeting to keep the oil market in balance,” UBS analyst Giovanni Staunovo said.
Pressuring prices on Friday, analysts reiterated expectations of a supply surplus next year, although some of them now view a smaller surplus than before.
Bank of America forecasts increasing oil surpluses to drive Brent to average $65 a barrel in 2025, while expecting oil demand growth to rebound to 1 million barrels per day (bpd) next year, the bank said in a note on Friday.
HSBC, meanwhile, now expects a smaller oil market surplus of 0.2 million bpd, from 0.5 million bpd previously, it said in a note.
Brent has largely stayed in a tight range of $70-75 per barrel in the past month, as investors weighed weak demand signals in China and heightened geopolitical risk in the Middle East.
“The general narrative is that the market is stuck in its rather narrow range. While immediate developments might push it out of this range on the upside briefly, the medium-term view remains rather pessimistic,” PVM analyst Tamas Varga said.
By Paul Carsten
LONDON (Reuters) -Oil prices pared some gains on Thursday after a source told Reuters OPEC+ has agreed to delay a planned oil output hike until April 2025.
was up 24 cents, or 0.3%, to $72.55 a barrel at 1237 GMT. It had been at $72.84 before Reuters reported the delay.
U.S. West Texas Intermediate (WTI) rose 25 cents, 0.4%, and was trading at $68.79 a barrel.
The planned delay comes as OPEC+, made up the Organization of the Petroleum Exporting Countries plus allies including Russia, tries to support prices as it wrestles with weak demand, notably from China, and rising supply outside the producer group.
“It will not make next year’s oil balance tight and supply surplus is still anticipated,” said Tamas Varga of oil broker PVM. “This view was mirrored in the gut price reaction.”
There remains the question of how long the delays could last, with this only the latest in a series. OPEC+ was originally due to begin raising output in October as part of a plan to gradually unwind the group’s most recent layer of output curbs of 2.2 million barrels per day.
“They reiterate that these barrels will indeed come back,” said Bjarne Schieldrop, chief commodities analyst at SEB. “It’s a limited time frame. This means there is no upside to the oil price in the next couple of years.”
Elsewhere, a larger-than-expected draw in stockpiles last week also provided some support to prices.
In the Middle East, Israel said on Tuesday it would return to war with Hezbollah if their truce collapses and its attacks would go deeper into Lebanon and target the state itself.
Meanwhile, Donald Trump’s Middle East envoy has travelled to Qatar and Israel to kick-start the U.S. President-elect’s diplomatic push to help reach a Gaza ceasefire and hostage release deal before he takes office on Jan. 20, a source briefed on the talks told Reuters.
On Thursday, OPEC+ is expected to postpone its planned increase in oil production, which was initially scheduled to commence in January, Reuters reported.
The decision to maintain current output levels aims to provide additional support for the oil market. The group, responsible for about half of the world’s oil supply, had intended to start easing output restrictions through 2025 but is now reconsidering in light of a global demand slowdown and increased production from non-member countries.
The consortium’s plan to unwind output cuts has faced challenges due to these market conditions, which have also exerted downward pressure on oil prices.
Accordingly, an extension of the current output cuts for an additional three months is the most probable outcome of the online meeting. However, there are indications that an even longer extension could be under consideration.
The deliberations within OPEC+ reflect the group’s ongoing efforts to balance oil supply with fluctuating global demand. The decision to delay the increase in output is seen as a measure to stabilize the market, which has been affected by various economic factors.
Market participants are closely monitoring the developments from OPEC+’s meeting, as the group’s decisions have significant implications for global oil supply and pricing. The final outcome of the meeting, including the length of the extension, will be determined by the consensus of the member countries.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.
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