Heavy, Sour Venezuelan Crude Will be Absent in U.S. Market

---

Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--Another stream of the heavy crude oil grades desired by many U.S. refineries was severed after the federal government gave Chevron Corporation (NYSE:CVX) (Houston, Texas) a deadline to stop working in Venezuela.

U.S. President Donald Trump took to his social media outlet in late February to warn that the license for Chevron to continue operating in Venezuela was in jeopardy. On Tuesday, the Treasury Department's Office of Foreign Assets Control made it official by saying Chevron needs to wind down its operations in the country by April 3.

Former President Joe Biden in 2022 authorized permits for Venezuelan exports through a venture between Chevron Corporation and state-owned Petroleos de Venezuela (PDVSA) (Caracas) after Venezuelan President Nicolas Maduro vowed to work with the opposition on democratic elections.

Elections last year, however, were not seen as fair as electoral evidence pointed to a loss for Maduro at the polls. Trump during an address to Congress on Tuesday made no mention of Venezuelan elections.

PDVSA in February exported an average of 934,465 barrels per day (BBL/d) of crude oil and fuels, the Reuters news agency reported this week. The Merey 16 grade of crude oil found largely in Venezuela is heavy, sour. That makes it suitable for a U.S. refining sector geared to process these viscous types of oil.

Over the seven-day period ending February 22, U.S. refiners took an average of 276,000 BBL/d from Venezuela, a 40% increase from the prior week. Reuters in a separate report added that the government in Caracas said the suspension would backfire as U.S. consumers, already reeling from lingering inflation, would face higher prices at the pump as a result of the loss of Venezuelan barrels.

Venezuelan imports only account for about 2% of the U.S. total, and China takes in more. Canada and Mexico account for 70% of total imports, with Canada accounting for 60%, or around 4 million BBL/d. Both governments were hit with sanctions by the United States this week. Like Venezuela, they both produce heavy oil.

Canada in particular has vowed a harsh tariff response. Tariffs are a tax on the importer, though they would also throttle the Canadian energy sector to some degree.

"With our largest trading partner imposing restrictions on free trade, we will take decisive action to ensure Canadian companies remain competitive and succeed in the global market, including the acceleration of resource development through more efficient and timely permitting and regulatory processes," a joint statement from provincial leaders in Canada read.

U.S. retail gasoline prices haven't moved yet in response to Trump's tariffs or to the expected loss from Venezuela. Midwest and Great Lakes customers may eventually see the most impact given the dense network of refineries relying on Canadian crude oil.

Concerns that Trump's economic policies would lead to higher inflation and throttle global trade are weighing on the broader markets, however. West Texas Intermediate, the U.S. benchmark for the price of oil, was down about 5% on the week in early Wednesday trading to move in the range of $66 per barrel.

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 200,000 current and future projects worth $17.8 Trillion (USD).