The Oil Crisis That Can’t Be Stopped
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Production is expected to fall to something like 1.4 mb/d this year, according to various forecasts, although there is deeper downside risk. The U.S. has reportedly been considering stronger sanctions against Venezuela, whether in the form of financial sanctions, or perhaps a ban on U.S. diluent heading to Venezuela, or even a ban on Venezuelan oil imports into the U.S.
The
removal of Secretary of State Rex Tillerson by the Trump administration and replacing him with current CIA Director Mike Pompeo could also result in an escalation of action against Venezuela.
The financial screws from Washington and Brussels are making things a lot worse for the Venezuelan government. “Buyers are trying to find alternative sources to Venezuela’s supplies, and banks are unwilling to give letters of credit to PDVSA,” the Atlantic Council report concluded. “As a result, Venezuelan exports to the United States, which had been relatively stable for the previous four years, collapsed in 2017.” Because PDVSA had higher margins in the U.S. market, trying to reroute oil shipments will cut into revenues. Selling oil to India or China is possible, but will require steep discounts and higher transportation costs.
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The Oil Crisis That Can’t Be Stopped | OilPrice.com