Venezuela to export $2 billion worth of oil to US
Venezuela has agreed to export $2 billion worth of crude to the United States, US President Donald Trump said on Tuesday. The agreement will result in supplies from China being diverted, as Venezuela avoids deeper production cuts.
The agreement comes on the back of Trump’s comments that he wants interim President Delcy Rodriguez to give US energy companies "total access" to Venezuela's oil industry. Trump elaborated online that Venezuela will be "turning over" between 30 and 50 million barrels of "sanctioned oil" to the US, with Energy Secretary Chris Wright overseeing the execution of the deal.
Venezuela has been selling its flagship crude grade, Merey, at around $22 per barrel below Brent for delivery at Venezuelan ports - valuing the deal at up to $1.9 billion. Merey crude can be processed by US Gulf Coast refineries that are built for heavy, sour grade oil.
Diversion of cargo routes
Supplying the trapped crude to the US could initially require reallocating cargoes originally bound for China, with the latter being Venezuela's top buyer in the last decade - especially since the US imposed sanctions on companies involved in oil trade with Venezuela in 2020. 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 flow of oil into the US is being controlled by Chevron, the main joint venture partner of Petróleos de Venezuela, S.A. (PDVSA). Chevron has been exporting between 100,000 and 150,000 barrels per day (bpd) of Venezuelan oil to the US, without interruption from the South American country in recent weeks under the blockade.
Flow of Venezuelan oil into the US
US Interior Secretary Doug Burgum said that an increased flow of Venezuelan heavy oil to the US Gulf would be "great news" for job security, future petrol prices in the US and for Venezuela.
Venezuela was historically one of the US’ largest oil suppliers, sending over 1.5 million bpd of oil to refineries in the 1990s - including to major international players such as ExxonMobil and Chevron. However, sanctions imposed by the US over the past decade sharply reduced exports and pushed Caracas to sell mainly to China.
Renewed shipments reflect a shift in the present-day state of affairs, and longstanding energy ties between the two nations. Redirecting China-bound cargoes to the US will help boost the latter's standing as the primary market for crude being shipped from the world’s largest proven reserves.
