By 
In a significant geopolitical and economic development, US President Donald Trump announced on Tuesday that Venezuela’s interim government is poised to deliver a massive quantity of oil – up to 50 million barrels – directly to the United States. What’s even more striking? Trump explicitly stated that the proceeds from these sales “will be controlled by me” as president, with the stated aim of benefiting both the people of Venezuela and the United States!
A Shifting Landscape for Venezuelan Oil
This revelation signals a major shift in the ongoing saga between the US and Venezuela. For months, the Trump administration has ramped up pressure on the Venezuelan government, demanding that they open their oil industry to US companies or face further military intervention. This latest agreement appears to be a direct response to that demand.
Venezuela has been sitting on millions of barrels of crude oil, trapped in tankers and storage facilities, unable to reach international markets due to a US-imposed blockade on exports since mid-December. This blockade was a key part of escalating US pressure on President Nicolas Maduro’s government, which culminated in a “large-scale strike” and the alleged kidnapping of Maduro by US forces this past weekend.
Venezuelan officials have consistently accused the US of attempting to seize their vast oil reserves. However, Trump’s social media post detailing the deal frames it as Venezuela “turning over” between 30 and 50 million barrels of “sanctioned oil,” to be sold at market price, with the funds managed by the US President for the benefit of both nations.
Who’s Handling the Deal?
US Energy Secretary Chris Wright has been tasked with overseeing the execution of this deal. The plan involves taking the oil directly from ships and sending it to US ports. Interestingly, initial reports suggest that some of these cargoes were originally destined for China, Venezuela’s top buyer over the last decade, especially after the US imposed sanctions on oil trade in 2020. An oil industry source hinted that Trump is keen for this to happen swiftly to claim a “big win.”
While this unfolds, neither Venezuelan government officials nor Petroleos de Venezuela (PDVSA), the state oil company, have offered public comments.
Chevron’s Pivotal Role and Market Impact
The announcement immediately sent ripples through the oil markets, with US crude prices falling more than 1.5 percent on the expectation of increased Venezuelan supply. Currently, Chevron, PDVSA’s primary joint venture partner, is the sole company authorized by the US to export Venezuelan oil, shipping between 100,000 and 150,000 barrels per day to the US without interruption, even under the blockade.
A crucial question remains: Will Venezuela have any access to the proceeds from these sales? Due to existing sanctions, PDVSA is excluded from the global financial system, its bank accounts are frozen, and it cannot execute transactions in US dollars. Given Venezuela’s flagship Merey crude sells at approximately $22 per barrel below Brent for delivery at Venezuelan ports, this deal could be valued at up to $1.9 billion. It’s worth noting that Delcy Rodriguez, sworn in as interim president on Monday, herself remains under US sanctions imposed in 2018.
Future Discussions and Potential Partnerships
This week, discussions between Venezuelan and US officials have explored various sales mechanisms, including possible auctions for interested US buyers and the issuance of US licenses to PDVSA’s business partners. These licenses, historically granted to companies like Chevron, India’s Reliance, China National Petroleum Corporation (CNPC), and European giants Eni and Repsol, allow access to Venezuelan oil for refining or resale. Sources indicate that some of these companies are already preparing to receive Venezuelan cargoes again.
Another intriguing possibility floated in these talks, though not mentioned by Trump, is the potential for Venezuelan oil to be utilized in the US Strategic Petroleum Reserve.
A “Great News” for All?
US Interior Secretary Doug Burgum hailed the prospect of increased Venezuelan heavy oil flows to the US Gulf as “great news” – not just for job security and future gasoline prices in the US, but also for Venezuela. “Venezuela has an opportunity now to actually have capital come in and rebuild their economy and take advantage,” he told Fox News, emphasizing that “With American technology, American partnership, Venezuela can be transformed.”
US refineries along the Gulf Coast are well-equipped to process Venezuela’s heavy crude grades, having imported around 500,000 bpd before initial energy sanctions. For PDVSA, which has already cut production due to storage limitations caused by the embargo, an export avenue is critical to avoid further production cuts.
As the news of these deal talks spread, oil traders quickly reacted, with differentials for some heavy oil grades in the US Gulf slipping around 50 cents per barrel on Tuesday, anticipating the influx of more Venezuelan supplies.
This development marks a complex and potentially transformative moment in US-Venezuela relations, with significant implications for global energy markets and the political landscape of South America.
Source: Original Article
Comments