US Preparing to Lift Venezuela Sanctions with Chevron to Resume Oil Production WSJ Reports

The WSJ is reporting that the US administration is preparing to scale down sanctions on Venezuela. The move would allow Chevron to resume oil production in the country. Such a move could see a reopening of U.S. and European markets to oil exports from Venezuela. WSJ cites people familiar with the proposal. The move comes after OPEC+ agreed on a 2mbpd crude oil production cut at the October meeting Wednesday.  President Biden appears increasingly desperate after having sold the US SPR down to lows not seen since 1984.

State oil company PDVSA in Lagunillas, Venezuela January 29, 2019. via REUTERS

Very clearly the OPEC+ move was a political afront to the US. To that end the cartel has agreed to a larger cooperation agreement. The move came less than three months after President Biden visited Saudi Arabia in a bid to repair relations between the world’s biggest oil consumer and its biggest crude-oil exporter. This move takes a significant amount of oil off the market. Based on quotas, the cut is around 1.2mbpd in actual production as a number of countries are producing materially below quota. The SPR releases are set to expire in November, cynics note that coincides with the US Midterm elections.

The WSJ reported; In exchange for the significant sanctions relief, the government of Venezuelan President Nicolás Maduro would resume long-suspended talks with the country’s opposition to discuss conditions needed to hold free and fair presidential elections in 2024, the people said. The U.S., Venezuela’s government and some Venezuelan opposition figures have also worked out a deal that would free up hundreds of millions of dollars in Venezuelan state funds frozen in American banks to pay for imports of food, medicine and equipment for the country’s battered electricity grid and municipal water systems.

The Journal reported U.S. officials saying details are still under discussion and cautioned that the deal could fall through, because it is contingent on Mr. Maduro’s top aides resuming talks with the opposition in good faith.

“There are no plans to change our sanctions policy without constructive steps from the Maduro regime,” Adrienne Watson, spokeswoman for the National Security Council, said.

Chevron, along with U.S. oil-service companies such as Halliburton would be allowed to work in Venezuela again. However, given how run down the Venezuela oil industry is it would put only a limited amount of new oil on the world market in the short term.

Chevron spokesman Ray Fohr didn’t comment on the proposed deal, but said that in Venezuela, “we have dedicated investments and a large workforce who are dependent on our presence.” He said the company is in compliance with the current sanctions framework.

Source: WSJ

From The TradersCommunity News Desk