Venezuela To Export $2 Billion Worth Of Oil To U.S. In Deal With Washington
HOUSTON/WASHINGTON, Jan 6 (Reuters) – Caracas and Washington have agreed to export $2 billion worth of Venezuelan crude oil to the United States, U.S. President Donald Trump said on Tuesday.
The deal is a strong sign that the Venezuelan government is responding to Trump’s demand that U.S. oil companies open up or risk further military intervention. Trump said he wants interim President Delcy Rodriguez to give the United States and private companies “full access” to Venezuela’s oil industry. In Venezuela, there are millions of barrels of oil loaded into tankers and storage tanks due to Trump’s blockade on exports since mid-December.
The blockade was part of escalating U.S. pressure on the government of Venezuelan President Nicolas Maduro, culminating in U.S. forces capturing him this weekend. Senior Venezuelan officials called Maduro’s capture a kidnapping and accused the United States of trying to steal the country’s vast oil reserves.
Trump said in his social media post that Venezuela would “deliver” between 30 and 50 million barrels of “sanctioned oil” to the United States.
“This Oil will be sold at the Market Price and this money will be controlled by me as President of the United States to ensure that it is used for the benefit of Venezuela and the people of the United States!” he added.
Stating that US Energy Secretary Chris Wright is responsible for the execution of the agreement, Trump added that the oil will be taken from ships and sent directly to US ports. Supplying the stuck crude to the United States may require reallocating cargoes originally destined for China, two sources told Reuters early on Tuesday. The Asian country has been Venezuela’s biggest buyer over the past decade and especially since the United States imposed sanctions on companies trading oil with Venezuela in 2020.
“Trump wants this to happen early so he can say it’s a big win,” an oil industry source said.
Venezuelan government officials and PDVSA did not comment.
CHEVRON CONTROLS THE VENEZUELAN OIL FLOW TOWARDS US
Following Trump’s announcement, US crude oil prices fell more than 1.5%; The agreement is expected to increase the volume of Venezuelan oil exported to the United States.
This oil flow is currently controlled entirely by PDVSA’s main joint venture partner, Chevron, with the permission of the United States.
Chevron, which exports between 100,000 and 150,000 barrels per day (bpd) of Venezuelan oil to the United States, is the only company that has been loading and transporting crude oil from the South American country uninterruptedly in recent weeks under the blockade.
It is not yet clear whether Venezuela will have access to revenues from the supply. The sanctions mean PDVSA is excluded from the global financial system, its bank accounts are frozen and it is prevented from conducting transactions in US dollars.
Venezuela is selling its flagship crude, Merey, at around $22 per barrel below Brent for delivery to Venezuelan ports, putting the value of the deal at up to $1.9 billion.
Rodriguez, who was sworn in as interim president on Monday, is under US sanctions imposed in 2018 for undermining democracy.
TALKS INCLUDE POSSIBLE AUCTIONS WITH US BUYERS
Venezuelan and U.S. officials this week discussed possible sales mechanisms, including auctions that would allow interested U.S. buyers to bid for cargoes and the issuance of U.S. licenses to PDVSA’s business partners that could lead to supply contracts, two sources told Reuters.
These licenses have in the past allowed PDVSA’s joint venture partners and customers, such as Chevron, India’s Reliance, China National Petroleum Corporation (CNPC), and European Eni and Repsol, to access Venezuelan oil to refine or resell to third parties. Two separate sources said this week that some companies have started preparations to re-acquire Venezuelan cargo.
The US and Venezuela are also discussing whether Venezuelan oil could be used in the US Strategic Petroleum Reserve in the future, one of the sources said. Trump did not address this possibility.
INCREASED OIL FLOW WOULD BE ‘GREAT NEWS’
U.S. Interior Secretary Doug Burgum said Tuesday that increased flows of Venezuelan heavy oil into the U.S. Gulf would be “great news” for job security, future gasoline prices in the U.S. and for Venezuela.
“Venezuela now has an opportunity for capital to come in, rebuild its economy and take advantage of that,” Trump told Fox News when asked about talks between governments on oil exports. “With American technology and American partnership, Venezuela can be transformed.”
U.S. refineries on the Gulf Coast can process Venezuela’s heavy crude grades and were importing about 500,000 barrels per day (bpd) before Washington imposed its first energy sanctions on Venezuela.
PDVSA was forced to cut production due to the embargo due to depletion of oil storage. If there is no way to export oil soon, it will have to cut production further, one of the sources said.
Oil traders reacted to news of deal talks on Tuesday. Spreads on some heavy oil grades in the U.S. Gulf fell around 50 cents a barrel on Tuesday on expectations of more supply from Venezuela.
(Reporting by Marianna Parraga, Erin Branco, Jonathan Saul, Jarret Renshaw and Arathy Somasekhar; additional reporting by Bhargav Acharya. Editing by Simon Webb, Anna Driver and Lincoln Feast.)
