Trump Targets More Foreign Oil with Tariffs

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--U.S. President Donald Trump on Monday signed an order that imposes tariffs on countries that import oil from Venezuela. Starting April 2, a 25% tax on goods imported into the United States would be imposed on any country that directly or indirectly purchases crude oil from Venezuela.

Elsewhere, the Trump administration gave U.S. supermajor Chevron Corporation (NYSE:CVX) (Houston, Texas) until the end of May to wind down operations in Venezuela, threatening much of the Latin American country's trade options.

Ole Hansen, the head of commodity strategy at Danish firm Saxo Bank, said in a Tuesday morning letter that putting sanctions on oil exports shows the Trump administration may be more willing to isolate his adversaries than putting a lid on crude oil prices. The price for Brent, the global benchmark for the price of oil, jumped Monday on the news, but retraced its steps on Tuesday following a grim reading of U.S. consumer confidence.

"With U.S. sanctions back in focus, it is worth noting that Iran and Venezuela have increased their crude oil production by 1.6 million barrels per day over the past four years," Hansen added.

Meanwhile, as the other members of the Organization of the Petroleum Exporting Countries (OPEC) curtail production to help support prices, Iran and Venezuela managed to increase their market share from 11% to 16%, Hansen said.

The so-called secondary sanctions that Trump imposed on Venezuela were already used on Iran as a bargaining chip in nuclear negotiations. Trump added that Venezuela is under extra scrutiny because of the perceived threat from the Tren de Aragua gang, which has been labeled a terrorist organization by the White House.

Tamas Varga, an analyst for London oil broker PVM, said Trump's policies so far have been chaotic at best, spoiling any investor confidence that emerged during the waning years of the previous administration. Markets, he said, do not appreciate trade disruptions in any form.

"Seat belts must remain fastened, the rollercoaster ride is far from over," he added.

China is a top destination for Venezuelan crude, and both Beijing and Washington have targeted each other's trade. China said recently it would not take in liquefied natural gas from the United States, striking at one of Trump's early-term priorities.

Trump has dangled tariff threats on a variety of goods since his return to the White House, only to later offer concessions. Sweeping tariffs on Canadian energy could go into effect on April 2, targeting the top U.S. crude oil exporter to the U.S.

Venezuela produces the heavier type of crude oil that much of the U.S. refinery sector is tailored to process. Currently, Venezuela accounts for about 2% of the total amount of crude oil imported into the U.S. economy. Over the seven-day period ending March 14, Venezuela delivered an average of 319,000 barrels per day to the U.S., a 115% increase from the prior week.

Those imports would end with Trump's order on Chevron.

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