U.S. Says It's Marketing Venezuelan Crude Oil

Written by Daniel Graeber for IIR News (Sugar Land Texas)

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Summary

The U.S. federal government is claiming it not only runs Venezuela, but now controls its oil sector. Apart from legal questions, the flood of new barrels on the water could create economic headwinds.

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No Question of Who's in Charge, U.S. Says

The U.S. federal government said it would begin marketing millions of barrels of crude oil from Venezuela under the terms of a deal announced by the Trump administration with few details.

"The United States government has begun marketing Venezuelan crude oil in the global marketplace for the benefit of the United States, Venezuela and our allies," a readout from the U.S. Department of Energy stated late Wednesday. "We have engaged the world's leading commodity marketers and key banks to execute and provide financial support for these crude oil and crude products sales."

The U.S. military captured Venezuelan President Nicolas Maduro and his wife on Venezuelan soil on Saturday, whisking them away to face trial in a U.S. court on narcotics charges. Both issued not guilty pleas, with Maduro maintaining he was kidnapped and is still the president.

U.S. President Donald Trump's administration, however, said the U.S. government now controls a country hosting the richest oil deposits in the world. Speaking to cable news broadcaster CNN earlier this week, White House Deputy Chief of Staff Stephen Miller said there's no question who's in charge of Venezuela.

"We are in charge because we have the United States military stationed outside the country. We set the terms and conditions," he said. "We have a complete embargo on all of their oil and their ability to do commerce. So for them to do commerce, they need our permission."

The Energy Department said that all proceeds from the sale of Venezuelan crude and refined petroleum products would be disbursed for the "benefit of the American people and the Venezuelan people at the discretion of the U.S. government."

It's expecting those sales to begin immediately, with the U.S. government claiming it would sell between 30 million and 50 million barrels of oil held in storage immediately and for an indefinite period of time.

On Thursday, some Republicans crossed party lines to vote for a war powers resolution that would limit further U.S. action in Venezuela. Should it pass through the House of Representatives, it would likely be vetoed by Trump.

Oil Hyperbole?

Many questions surround the claims. IIR Energy data show Venezuelan storage levels might be only a fraction of what the U.S. federal government stated.

Subscribers to Industrial Info's Global Market Intelligence (GMI) Power Project and Plant databases can learn more about Venezuela's storage capacity--including capacities, investment values and necessary equipment--in this link.

Elsewhere, Trump said the sales would help lower crude oil prices to around $50 per barrel, according to various media reports, down from around $60 for the global benchmark Brent.

That raises market questions about the revival of the Venezuelan oil sector, which reached its peak in terms of output in the 1970s. It now accounts for only a fraction of global oil sales, and the operators working in the country now need oil priced at around $80 to break even.

Billions of dollars in investments would be required to revive the Venezuelan oil sector, though it's unclear if any of the supermajors with the cash to do so would be willing to invest this early in the game. Chevron (Houston, Texas), the only U.S. company with a license to operate in Venezuela, has said its global focus was on capital discipline.

Meanwhile, the Trump administration claims the handover of crude oil is part of a formal deal brokered with what he described as the "interim" authorities in Venezuela, though there's no record of such deal apart from an announcement on the social media platform X and Venezuelan Vice President Delcy Rodriquez saying that the nation is not at war, but "was attacked by a nuclear power."

While the U.S. government in the past has sold oil seized from sanctioned vessels carrying Iranian crude oil, it's unclear what legal authority supports the sale of oil from Venezuela's sovereign territory. Though the federal government said it was easing sanctions to support further involvement, it's also unclear if private-sector companies are willing to stomach whatever long-term military involvement or reconstruction comes next.

Nevertheless, waters off the coast of Venezuela appear busy. Publicly available vessel-tracking services show the crude oil tanker Nave Photon departed Venezuela's Jose export terminal and is bound for Freeport, Texas.

The U.S. refining sector, meanwhile, relies heavily on foreign supplies of crude oil, because many plants are not designed to process the light, sweet crude oil found in domestic shale basins. All of the Top 10 foreign suppliers of oil to the U.S. economy produce some form of heavy crude oil.

Of those, it's Canada that leads the pack by far, delivering around 4 million barrels per day to the U.S. economy. That accounts for about 60% of foreign deliveries, while Venezuelan volumes represent only 3.5% of the total.

By the Numbers

• 50 million barrels of oil available, U.S. says
• $80 break-even in Venezuela
• 1970s was the last time Venezuela was a major oil producer

Key Takeaways

• U.S. says there's no question who controls Venezuela.
• On-the-ground operations appear normal.
• Venezuela maintains it was attacked.

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About IIR News
IIR News is a trusted source of news for the industrial process and energy markets, powered by Industrial Info Resource's Global Market Intelligence (GMI).

About Industrial Info Resources
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 250,000 current and future projects worth $30.2 Trillion (USD).

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