Venezuelan oil exports to USA still a primary source of cash

Muriel Colon
January 27, 2019

"A dramatic escalation in tensions has raised fears that the USA could impose sanctions on Venezuelan oil, threatening to complicate OPEC's job of balancing global oil supplies", Lawler said. US crude oil exports over the past four weeks averaged about 2.3 million barrels per day, up by approximately 1.0 million barrels per day year-on-year.

American benchmark West Texas Intermediate (WTI) was trading at $53.05 a barrel at the same time on Friday for a 0.2 percent loss, ending the previous day at $53.13 per barrel.

According to reports on Thursday, the Trump administration signaled it could impose sanctions on Venezuela's crude exports.

The United States has considered moves to cripple Venezuela's oil shipments, which account for almost all of the country's exports, in response to the reelection of socialist President Nicolas Maduro, a vote that was widely viewed as a sham. However, this bullish view is eclipsed by the above mentioned possibility of a slowdown in the global economy and fears of a supply glut on the back of increasing U.S. oil production.

John Kilduff, founding partner at Again Capital, told CNBC's "Squawk Box" that refiners on the U.S. Gulf Coast are "heavily dependent" on thicker, heavier Venezuelan oil "to the tune of about 500,000 bpd", and sanctions against the Bolivian republic "could throw a monkey wrench in the oil market because not only would we not be buying their oil.the rest of the world may not be getting Venezuela's oil because they wouldn't have the byproduct they need from us to make their oil flow".

Oil market sentiment was also weakened by an increase in US crude inventories after refineries cut output, data from industry group the American Petroleum Institute showed on Wednesday. "Looking ahead, consumer prices will rise 10 million percent in 2019, according the report".

For the full year, Russian imports rose to 71.49 million tons, or 1.43 million bpd, up 19.7 percent from 59.7 million tons in 2017.

Venezuelan oil exports to the USA have declined steadily over the years, falling particularly sharply over the past decade as its production plummeted amid its long economic and political crisis.

Developments in Venezuela take on an even greater importance for the oil market considering that the country holds the rotating presidency of OPEC this year, analysts stressed.

Venezuela's crude production has declined steadily since former Socialist president Hugo Chavez won power in 1999, and has fallen by half over the past decade to 1.2 million barrels a day (b/d).

Shipments to the United States account for about 75 percent of the cash Venezuela gets for crude shipments, according to a Barclays research note published last week.

However, the wealth and luck that should have been brought by Venezuela's huge oil reserves, has been affected by political unrest in recent years. One proposal would see Washington declare that any payment to Venezuela in return for oil must go to the new government, or perhaps some form of humanitarian account to help feed the country's starving people.

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