summary
Agreement to shift Venezuelan oil exports from China to the US President Trump says agreed supply is 30 million to 50 million barrels Exports expected to prevent further cuts in Venezuelan oil output Chevron is currently the only US company allowed to export Venezuelan crude US Secretary of the Interior says US Gulf oil refiners will benefit
HOUSTON/WASHINGTON, Jan 6 (Reuters) – Caracas and Washington have reached an agreement to export up to $2 billion worth of Venezuelan crude oil to the United States, U.S. President Donald Trump said on Tuesday, in a flagship deal that would allow Venezuela to divert supplies from China while avoiding further oil production cuts.
The agreement is a strong sign that the Venezuelan government is heeding President Trump’s demands to open up to U.S. oil companies or risk further military intervention. President Trump has said he wants interim President Delcy Rodriguez to give the United States and private companies “full access” to Venezuela’s oil industry.
Venezuela has loaded millions of barrels of oil into tankers and storage tanks but has been unable to ship them since mid-December due to an export blockade imposed by President Trump.
The blockade is part of increased U.S. pressure on the government of Venezuelan President Nicolás Maduro, which culminated in the U.S. military’s capture of the president this weekend. Venezuelan government officials have called Maduro’s capture a kidnapping and accused the United States of trying to steal the country’s vast oil reserves.
President Trump said in a social media post that Venezuela plans to “deliver” 30 million to 50 million barrels of “sanctioned oil” to the United States.
“This oil will be sold at market price and managed by me, the President of the United States, to ensure that the funds are used to benefit the people of Venezuela and the United States!” he added.
President Trump said U.S. Energy Secretary Chris Wright is responsible for implementing the agreement, adding that oil will be extracted from ships and sent directly to U.S. ports.
Supplying the United States with the trapped crude oil may require the reallocation of cargo originally bound for China, two sources told Reuters early on Tuesday. The Asian country has been Venezuela’s biggest buyer over the past decade, especially since the United States imposed sanctions on companies involved in oil trade with Venezuela in 2020.
“Mr. Trump is hoping for this to happen quickly so he can call it a big victory,” said an oil industry official.
Venezuelan government officials and PDVSA did not comment.
Chevron controls the flow of Venezuelan oil into the US
U.S. oil prices fell more than 1.5% after President Trump’s announcement, and the deal is expected to increase exports of Venezuelan crude to the United States.
This oil flow is now fully controlled by Chevron, PDVSA’s principal joint venture partner, under US permits.
Chevron exports between 100,000 and 150,000 barrels per day (bpd) of Venezuelan crude oil to the United States, and has been the only company to load and transport crude from the South American country without interruption in recent weeks under lockdown.
It was not immediately clear whether Venezuela would have access to proceeds from the supplies. The sanctions mean PDVSA will be removed from the global financial system, its bank accounts will be frozen and transactions in US dollars will be blocked.
Venezuela sells its main crude oil grade, Melee, for delivery at Venezuelan ports for about $22 a barrel less than Brent, with a transaction value of up to $1.9 billion.
Rodriguez, who was sworn in as interim president on Monday, was himself subject to U.S. sanctions in 2018 for undermining democracy.
Negotiations include possible auction with US buyers
Two sources told Reuters this week that Venezuelan and U.S. officials discussed possible sales mechanisms, including an auction that would allow interested U.S. buyers to bid on the cargo, and issuing U.S. licenses to PDVSA’s business partners that could lead to supply contracts.
These licenses have in the past allowed PDVSA’s joint venture partners and customers, including Chevron, India’s Reliance China National Petroleum Corporation (CNPC), and Europe’s Eni and Repsol, to access Venezuelan crude oil to refine or resell it to third parties.
This week, some of those companies began preparing to accept Venezuelan cargo again, two separate sources said.
The U.S. and Venezuela also discussed whether Venezuelan oil could be used in the U.S. strategic oil reserve in the future, one of the people said. President Trump did not mention this possibility.
Increase in oil flows will be ‘great news’
U.S. Secretary of the Interior Doug Burgum said Tuesday that increased flows of Venezuelan heavy oil into the U.S. Gulf Coast would be “great news” for job security and future gasoline prices in the U.S. and Venezuela.
Asked about government-to-government talks on oil exports, he told Fox News: “Venezuela now has an opportunity to actually have capital coming in to rebuild its economy and take advantage of it.” “With American technology and American partnerships, Venezuela can be transformed.”
U.S. refineries in the Gulf can process Venezuela’s heavy crude oil and were importing about 500,000 barrels per day (bpd) before the U.S. government first imposed energy sanctions on Venezuela.
PDVSA has already been forced to cut production due to the embargo because of a lack of oil storage. Unless there is a way to quickly export the oil, further production cuts will be necessary, one of the sources said.
Oil traders reacted to news of the deal talks on Tuesday. On Tuesday, differential prices for some U.S. Gulf heavy oil grades fell by about 50 cents a barrel on the prospect of increased supplies from Venezuela.
Reporting by Marianna Paraga, Erin Blanco, Jonathan Soule, Jarrett Renshaw and Aracey Somasekhar. Additional reporting by Bhargav Acharya. Edited by Simon Webb, Anna Driver, and Lincoln Feast.
