US sanctions on Venezuela will be weaker than expected

January 29, 2019

Rystad Energy analyst Paola Rodriguez-Masiu comments on the sanctions announced yesterday by the US against Venezuelan state oil company PDVSA:

“The sanctions will deal a meaningful blow to the Maduro administration’s cashflow, but the effects will not be as harsh as the United States expects. Administration officials reportedly said the sanctions would result in more than $11 billion in export losses for Venezuela over the next year, but I believe this figure will be substantially lower.”

Rodriguez-Masiu, a native Venezuelan who coordinates Rystad Energy’s global refinery and infrastructure data, added:

“The oil that Venezuela currently exports to the US will be diverted to other countries and sold at lower prices. For countries like China and India, yesterday’s news was akin to Black Monday. They will be able to pick up these oil volumes at great discounts.”

Few countries have refining capacity that can handle the heavy crude oil quality coming out of Venezuela. The country currently exports around 1.2 million barrels per day, of which approximately 450,000 bpd go to the US, while 300,000 go to India and 240,000 to China. 

Many refineries along America’s Gulf coast import Venezuelan heavy crude to mix with lighter oil coming out of shale basins such as the Permian in west Texas. With sanctions in place, those refineries will have to turn to other sources for heavy crude.

“The sanctions will affect refinery margins in the US. Now they will have to import heavy crude from the Middle East at a premium. US refiners will be amongst the biggest losers, as we have noted earlier,” Rodriguez-Masiu remarked.

The oil market largely shrugged off news of the sanctions. “The market has priced in the Venezuelan crisis. Plus, the export volumes will not be eliminated from the market, but rather rerouted to other countries,” according to the Rystad Energy analyst.

Learn more about Oil Market Solutions.

 

###

 

Contacts

Paola Rodriguez-Masiu
Analyst, Oil markets
Phone: +33 635324768
Paola.Rodriguez-Masiu@rystadenergy.com

 

Morten Bertelsen
Media Relations
Phone: +47 951 98 742
morten.bertelsen@rystadenergy.com

 

About Rystad Energy

Rystad Energy is an independent energy research and business intelligence company providing data, tools, analytics and consultancy services to the global energy industry. Our products and services cover energy fundamentals and the global and regional upstream, oilfield services and renewable energy industries, tailored to analysts, managers and executives alike. Rystad Energy’s headquarters are located in Oslo, Norway with offices in London, New York, Houston, Stavanger, Moscow, Rio de Janeiro, Singapore, Bangalore, Tokyo, Sydney and Dubai.