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Washington has tightened its grip on Venezuela by extending sanctions to companies supplying diluents to the South American country.
“We are tightening the loop on any potential workarounds on the standing sanctions that allow the Maduro regime to still find ways to exploit PDVSA as a cash cow,” one Washington official told Reuters, adding “The changing of the language [of the Venezuela sanctions statement] puts international companies on notice that any continued engagement or transactions they have with PDVSA selling diluents is at risk, or subject to future potential sanctions.”
The United States has been targeting Venezuela with increasing sanction pressure since January when President Nicolas Maduro was inaugurated for a second term in office after last year’s elections that the U.S. called illegitimate.
The sanctions have effectively put a stop to Venezuelan crude oil exports to U.S. refiners, which has happened at an increasingly inconvenient time for the latter: the crude oil produced closest to the Gulf Coast, in the Permian, is increasingly light, some of it bordering on superlight, and cannot be processed effectively at the refineries, which need heavy oil to blend the light with.
Meanwhile, Venezuela’s oil exports slumped by 17 percent last month as a result of the sanctions. Between January and March 2019, Gulf Coast oil imports from the country in particular plummeted by 498,000 bpd to 47,000 bpd in March.
“That’s a big structural problem that’s not going to go away anytime soon. We’ve got this mismatch in the country,” one analyst told Reuters. “We’ve got refineries that want heavy oil and producers that make light oil.”
Even so, the tightening hold on Venezuela is unlikely to relax anytime soon. The U.S. was the first foreign government to throw its support behind Venezuela’s opposition leader Juan Guaido, who has put in a lot of effort to spark mass protests against the Maduro government but without any actual success in removing said government.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.