Washington may be nearing a decision on extending sanctions against Venezuela to include imports of Venezuelan crude and exports of U.S. refined products to the troubled South American country.
That’s what Secretary of State Rex Tillerson said during a visit to Argentina, adding that “One of the aspects of considering sanctioning oil is what effect would it have on the Venezuelan people? Is it a step that might bring this to an end more rapidly?”
Current sanctions target separate individuals from the Nicolas Maduro government as well as a ban on U.S. banks and other institutions buying Venezuelan debt. Venezuela has traditionally been an important exporter of oil to the United States, which made Washington wary of playing the oil import ban card.
Venezuela has been struggling to rein in the decline of its crude oil production resulting from underinvestment, mismanagement, and, most recently, U.S. sanctions. Last October, crude oil production fell to the lowest level in nearly 30 years, as PDVSA finds itself unable to pay for services rendered by oilfield service providers, who are now refusing to continue working with it.
Meanwhile, the quality of the crude Venezuela still exports to the U.S. is falling, which has made buyers less willing to buy it. The Trump administration last mentioned an oil import ban as a possible scenario last July ahead of a Constitutional Assembly vote that was widely seen as aimed at cementing Maduro and his government in power despite the economic crisis that has been ravaging the country since oil prices started falling in 2014.
However, at the time, Venezuelan exports were still considerable, at over 800,000 bpd in the first week of July, EIA data showed. However, by November 2017 this had fallen to 555,000 bpd and further to 323,000 bpd as of January 26 this year. In other words, the time may be ripe to play the oil import card without affecting U.S. refiners too severely.
By Irina Slav for Oilprice.com
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