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U.S. Refiners Brace For Venezuelan Supply Crunch

Published: January 29, 2019
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Source: Oil Price

The trump administration announced new sanctions on Venezuela’s state oil company PDVSA, which will significantly reduce its crude oil exports to Gulf Coast refiners, Reuters reports, without adding any details as to the nature of the sanctions. But according to Rystad Energy, ‘’the effects of the sanctions will not be as harsh as the United States expects’’ as PDVSA will be looking to re-route crude exports.

New sanctions against Venezuela have been discussed for a while as the situation in the South American country quickly deteriorated after the start of the second presidential term of Nicolas Maduro. There was some skepticism among analysts whether Washington will go the whole nine yards and slap a blanket oil import ban on Venezuelan crude, and the Reuters report seems to confirm it. A total ban on Venezuelan oil imports would push prices at the pump considerably until Gulf Coast refiners replace their deliveries with other sources of heavy crude.

The announcement of the sanctions comes on the heels of a statement by Venezuela’s President that the country will continue selling oil to the United States despite both breaking diplomatic relations last week.

Turkey’s Anadolu Agency quoted Maduro as saying, “We have multifaceted relations with the U.S. We’ve cut off the diplomatic and political ties with the U.S. government but our other relations will continue. If they want to buy potatoes, we will sell potatoes. If they want to buy oil, we will sell oil. If they do not want to buy anything, we will not sell.”

Venezuela is a major supplier of heavy crude to Gulf Coast refineries, but it is not the only one. Canada is by far the largest supplier of heavy crude to U.S. refiners, and Mexico is also a large exporter to its neighbor in the north.

In the meantime, Venezuela is being rocked by anti-government protests and Guaido has called for more people to take to the streets to topple Maduro. The call came on the heels of an ultimatum from the European Union for Caracas to set a date for new elections. At the same time, Maduro has publicly demonstrated that he has the support of the army with a round of military exercises amidst the protests.

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