Trump: US reaches deal for $2bn in Venezuelan oil
Caracas and Washington have reached a deal to export up to $2 billion worth of Venezuelan crude oil to the United States, President Donald Trump said on Tuesday, which would divert supplies from China while helping Venezuela avoid deeper oil production cuts.
Washington is also demanding that Venezuela reduce its relationships with China, Russia, Iran and Cuba, the US network ABC reported.
Any move to cut ties would represent a full political realignment for Venezuela, which has relied heavily relied on the quartet for economic and security stability under the governments of both Nicolás Maduro and his predecessor, Hugo Chavez.
The oil agreement is seen as a strong sign that the Venezuelan government is responding to Trump’s demand that it open up to US oil companies or risk more military intervention.
Trump has said he wants interim President Delcy Rodriguez to give the US and private companies “total access” to Venezuela’s oil industry. Venezuela has millions of barrels of oil loaded on tankers and in storage tanks that it has been unable to ship due to a blockade on exports imposed by Trump since mid-December.
The blockade was part of rising US pressure on Maduro that culminated in US forces capturing him over the weekend. Top Venezuelan officials have called Maduro’s capture a kidnapping and accused the US of trying to steal the country’s vast oil reserves.
Venezuela will be “turning over” between 30 million and 50 million barrels of “sanctioned oil” to the US, Trump said in a social media post.
“This Oil will be sold at its Market Price, and that money will be controlled by me, as President of the United States of America, to ensure it is used to benefit the people of Venezuela and the United States!” he added.
US Energy Secretary Chris Wright is in charge of executing the deal, Trump said, adding that the oil would be taken from ships and sent directly to US ports.
Diverting cargoes from China
Supplying the trapped crude to the US could initially require reallocating cargoes originally bound for China, two sources had told Reuters earlier on Tuesday. The Asian country has been Venezuela’s top buyer in the last decade and especially since the United States imposed sanctions on companies involved in oil trade with Venezuela in 2020.
“Trump wants this to happen early so he can say it is a big win,” an oil industry source said.
Venezuelan government officials and PDVSA, the Venezuelan state-owned oil company, did not provide comment.
US crude prices fell more than 1.5% after Trump’s announcement, with the agreement expected to increase the volume of Venezuelan oil exported to the US
That flow of oil is currently controlled entirely by Chevron, PDVSA’s main joint venture partner, under a US authorisation.
Chevron, which has been exporting between 100,000 and 150,000 barrels per day (bpd) of Venezuelan oil to the US, is the only company that has been loading and shipping crude without interruption from the South American country in recent weeks under the blockade.
It was not immediately clear if Venezuela would have any access to proceeds from the supply. Sanctions mean PDVSA is excluded from the global financial system, its bank accounts are frozen and it is blocked from executing transactions in US dollars.
Venezuela has been selling its flagship crude grade, Merey, at around $22 per barrel below the price of benchmark Brent crude for delivery at Venezuelan ports, giving a value for the deal at up to $1.9 billion.
Rodriguez, sworn in as interim president on Monday, is herself under US sanctions imposed in 2018 for undermining democracy.
More licences possible
Venezuelan and US officials this week discussed possible sales mechanisms, including auctions to allow interested US buyers to bid for cargoes, and issuing US licences to PDVSA’s business partners that could lead to supply contracts, two sources told Reuters.
Those licences have in the past allowed PDVSA’s joint-venture partners and customers, including Chevron, Reliance of India, China National Petroleum Corporation (CNPC) and Eni and Repsol of Europe, to have access to Venezuelan oil to refine or to resell to third parties.
Some of those companies have begun making preparations for receiving Venezuelan cargoes again, two separate sources said.
US Interior Secretary Doug Burgum said on Tuesday that an increased flow of Venezuelan heavy oil to the US Gulf would be “great news” for job security, future gasoline prices in the US and for Venezuela.
“Venezuela has an opportunity now to actually have capital come in and rebuild their economy and take advantage,” he told Fox News. “With American technology, American partnership, Venezuela can be transformed.”
US refineries on the Gulf Coast can process Venezuela’s heavy crude grades and were importing 500,000 bpd before Washington first imposed energy sanctions on Venezuela.
PDVSA has had to cut production due to the embargo, because it is running out of storage for the oil. Without a way to export oil soon, it would have to cut production more, one of the sources said.
Source – Bangkok News
