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IEA Yet To Assess Impact Of U.S. Sanctions On Venezuela’s Oil

Oil tanker

It is too early to quantify the impact of the latest U.S. sanctions on Venezuela’s oil industry and exports, Fatih Birol, the Executive Director of the International Energy Agency (IEA), told Reuters on Wednesday.

On Monday, the U.S. Treasury slapped another round of sweeping sanctions against Venezuelan state-owned oil firm PDVSA, in order to “help prevent further diverting of Venezuela’s assets by Maduro and preserve these assets for the people of Venezuela.”

The U.S. backed last week Juan Guaidó, the chairman of the National Assembly, as the legitimate president of Venezuela, after Guaidó declared himself interim president. 

“The path to sanctions relief for PdVSA is through the expeditious transfer of control to the Interim President or a subsequent, democratically elected government,” Secretary of the Treasury Steven T. Mnuchin said.

Speaking to Reuters on Wednesday, the IEA’s head Birol said:

“There are lots of uncertainties in the oil markets now for different reasons. We are following the uncertainties in Latin America, in the Middle East, and Asia as well.”

Venezuela’s top oil clients are the United States, which imported around 500,000 bpd from Venezuela last year through October, as well as India and China.

According to Birol, the oil market is currently well supplied, and a lot of U.S. shale oil is coming to the market as well.

Earlier this week, Khalid al-Falih, the energy minister of OPEC’s leading producer Saudi Arabia, said that the political crisis in Venezuela had not had an impact on the oil market and there was no need for any additional measures.

While al-Falih sees no need for market intervention, analysts told CNBC on Monday that Venezuela is back in the spotlight of the oil market.

“Oil’s ticking time bomb is sure to detonate at some point and the price reaction will be anything but muted,” CNBC quoted Stephen Brennock, oil analyst at PVM Oil Associates, said in a research note published on Monday.

By Tsvetana Paraskova for Oilprice.com

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  • Mamdouh Salameh on January 30 2019 said:
    Even without the assessment of the International Energy Agency (IEA), the global oil market has already shrugged off any adverse impact of US sanctions on Venezuela on the global oil market and prices unless there is a complete collapse of Venezuela’s oil industry as a result of a general strike by workers of the National Oil Company of Venezuela, PDVSA, or a civil war.

    Whatever oil Venezuela exports to the US can easily be diverted to China and India. Moreover, China and Russia which both are owed some $30 bn will do their utmost to prevent the Venezuelan economy from collapse. These sanctions are doomed to fail like the ones imposed on Iran.

    However, if the IEA’s forthcoming assessment proves as unrealistic or even fanciful like the one on the impact of US sanctions on Iran’s oil exports or its projection that US oil production by 2025 will be bigger than the combined production of both Russia and Saudi Arabia, then it will not be worth the paper it is written on.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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