• 2 minutes Oil Price Could Fall To $30 If Global Deal Not Extended
  • 5 minutes Middle East on brink: Oil tankers attacked off Oman
  • 8 minutes CNN:America's oil boom will break more records this year. OPEC is stuck in retreat
  • 1 hour Iran downs US drone. No military response . . Just Destroy their Economy Completely. Can Senator Kerry be tried for aiding enemy ?
  • 1 hour The Pope: "Climate change ... doomsday predictions can no longer be met with irony or disdain."
  • 3 hours Emissions Need To Be Halved To Avoid 3C Warming
  • 2 hours Here We Go: New York Lawmakers Pass Aggressive Law To Fight Climate Change
  • 4 hours Coal Boom in Asia is Real and a Long Trend
  • 9 hours Summit in Pyongyang: China's Xi Says World Hopes North Korea-U.S. Talks Can Succeed
  • 19 hours Solar Panels at 26 cents per watt
  • 10 hours Pioneer CEO Said U.S. Oil Production would be up to 15 mm bbls/day NOW if we had the pipelines. Permian pipelines STARTING Q3
  • 5 hours Huge UK Gas Discovery
  • 1 day The Magic and Wonders of US Shale Supply: Keeping energy price shock minimised: US oil supply keeping lid on prices despite global risks: IEA chief
  • 1 day Magic of Shale: EXPORTS!! Crude Exporters Navigate Gulf Coast Terminal Constraints
  • 1 day US to become net oil exporter in November: EIA
  • 22 hours US Shale Drilling lacks regulatory body.
  • 23 hours Ireland To Ban New Petrol And Diesel Vehicles From 2030
Alt Text

Bullish EIA Data Pushes Oil Prices Higher

After two consecutive weeks of…

Alt Text

Oil Sands Production To Hit 4 Million Bpd By 2030

Crude oil production from Canada’s…

Alt Text

BP: Petrochemicals Drive U.S. Oil Demand Boom

The United States saw its…

Nick Cunningham

Nick Cunningham

Nick Cunningham is a freelance writer on oil and gas, renewable energy, climate change, energy policy and geopolitics. He is based in Pittsburgh, PA.

More Info

Trending Discussions

U.S. Sanctions Could Be The Final Nail In The Coffin For Venezuelan Oil

The White House is looking at slapping sanctions on a Venezuelan oil services company while also restricting insurance for oil shipments from the South American country, among other possible measures, according to Reuters.

The moves come as the Venezuelan President Nicolas Maduro is planning elections for April, which few expect to be free or fair. Unlike prior elections, the upcoming race will likely be met with global condemnation, and many countries could refuse to recognize the results altogether.

The election would be the latest move by President Maduro to tighten his grip on the nation, having already neutered much of the country’s democratic institutions. But because of the high-profile nature of an essentially rigged presidential election, Washington is planning more sanctions.

How or when such measures are implemented is still unclear. A U.S. official told Reuters that the moves could come in waves, with some sanctions coming before the election and others after. Either way, the more aggressive the action, the more it will take a bite out of Venezuela’s oil sector, while also likely spreading misery among the Venezuelan population.

A few options have been on the table. More minor steps would consist of sanctions on individuals within the Maduro government, although that has already been tried a bit, with little effect. A more serious option would be to prohibit the export of U.S. light oil and diluents to Venezuela, fuels that are used to blend in which Venezuela’s heavy oil. This shipments have already been down because of a lack of cash at state-owned PDVSA. Related: U.S. Gasoline Consumption Falls For The First Time In Five Years

Another option would be to ban Venezuelan oil into the U.S. These flows have also already declined, although that has more to do with the overall decline in Venezuelan production. Still, a ban would have wide-reaching and dire implications. Venezuela could reroute shipments to India or China, but those sales would likely only occur at a hefty discount.

“Oil sanctions are not taken lightly,” the U.S. official told Reuters. “This would be a fairly strong escalation for U.S. policy, whether it’s a complete oil sanction or salami slices of different graduated steps.”

Last year, the U.S. banned American banks from issuing or restructuring debt with the Venezuelan government or PDVSA. The measures have made it difficult for Venezuela to deal with its mountain of debt, and many analysts say the financial screws have contributed to the steep declines in oil production.

Yet another option would be to target the insurance of oil tankers carrying Venezuelan crude, a tactic used against Iran several years ago and widely cited as a major reason why Iranian oil exports fell. This too would probably severely curtail oil exports.

The effect on the oil market would be significant. “I think (it would cause) a fairly strong shock to the oil market in the short term,” the U.S. official said. Venezuela’s oil production is already expected to continue to decline – Barclays expects output to average 1.43 million barrels per day this year, down from 2.18 mb/d in 2017. Related: Kurdish-Iraqi Deal Could Restore Oil Production

However, measures from the U.S. could make that pretty awful forecast look optimistic. Oil sanctions, in one form or another, would likely lead to severe production losses. U.S. Secretary of State Rex Tillerson suggested that sales of oil from the U.S. SPR could offset the disruption.

The nail in the coffin would be some form of withdrawal by Venezuela’s joint venture partners. A new report from Columbia University, which summarizes a December panel event, noted that Venezuela’s production is in a “death spiral,” and that production declines have spread from PDVSA-run operations to those of the joint ventures, which have held up until now.

“Foreign operators lost confidence after PdVSA, which for years had failed to meet its full budgetary requirements, reportedly stopped making all payments into the JVs’ budgets,” the report concluded. “Having reduced capex, foreign operators are effectively limiting their exposure and cutting back on operations. Production looks set to plummet further in 2018.”

By Nick Cunningham of Oilprice.com

More Top Reads From Oilprice.com:




Download The Free Oilprice App Today

Back to homepage

Trending Discussions


Leave a comment
  • Naomi on March 01 2018 said:
    President Trump laid a tariff on Venezuela aluminum exports.
  • abinico warez on March 04 2018 said:
    Elections which few expect to be free or fair - so just like American elections - big deal.

Leave a comment





Oilprice - The No. 1 Source for Oil & Energy News