Return of US Oil Sanctions on Venezuela to Hit Revenue, Fuel Imports

  • 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.
  • This week, Washington ordered a wind-down of all business transactions between U.S. entities and Venezuela's state miner Minerven. In addition, Washington noted it would unwind in April, 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 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, 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 $20Bn this year from some $12Bn in 2023, according to Caracas-based consultancy Ecoanalitica. However, 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," 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 "If the license is withdrawn in April, the proceeds will be reduced again and the scenarios of strong economic growth and a competitive election will fade," he added.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, Eni, Repsol, and Maurel & Prom to avoid a total break with Venezuela, that might not provide sustainable investment to expand output.

(Source: Reuters)