U.S. - VENEZUELA SANCTIONS
PLATTS - US President Donald Trump on Wednesday officially recognized Venezuelan opposition leader Juan Guaido as the legitimate president of Venezuela, a designation that could impact PDVSA's access to oil export revenue and complicate commercial deals with US refiners.
The White House has also prepared sanctions on Venezuela's oil sector, including a full embargo on imports of Venezuelan crude, sources familiar with the plan said.
"Everything is on the table," a senior administration official said Wednesday. "All options."
Sources said they expect that if Venezuelan President Nicolas Maduro responds to Trump's recognition of Guaido by jailing or harming the opposition leader, then oil sanctions will be triggered. Maduro announced Wednesday that he plans to break diplomatic and political relations with the US and gave US diplomats 72 hours to leave the country.
In a statement, Trump said that he will "continue to use the full weight of United States economic and diplomatic power to press for the restoration of Venezuelan democracy."
Trump's announcement had little impact on the oil market since analysts said it remains unclear if the US would impose significant sanctions on Venezuelan crude flows.
"Concerns about Venezuela have been on back burner of the market for quite some time," Tradition Energy analyst Gene McGillian said. "There were already expectations that output would decline in the coming year."
ICE March Brent settled down 36 cents Wednesday at $61.14/b and NYMEX March WTI was 39 cents lower at $52.62/b at market close.
Administration officials provided no guidance on what the recognition of a new Venezuelan president meant for commercial transactions with PDVSA, but sources said it would likely force US refiners to stop purchases of Venezuelan crude, potentially within 90 days.
Trump's recognition of an alternative government to Maduro's "could allow the international community to freeze and divert assets and revenues, including proceeds from oil exports, the effect of which could be even larger than an embargo," according to a recent Barclays note.
In a note Wednesday, analysts with ClearView Energy Partners wrote that if Guaido was officially recognized as president, and Maduro subsequently jailed him, "we would strongly anticipate US economic retaliation."
Chevron, PBF Energy, Valero and Citgo, which is owned by PDVSA, are the largest US refiners of Venezuelan crude, according to the US Energy Information Administration. Spokesmen for those four companies did not respond to requests for comment Wednesday.
US imports of Venezuelan crude averaged about 574,000 b/d in December, down roughly 40% from July 2016, when US refiners imported more than 850,700 b/d, according to US Customs and Border Protection data. US imports of Venezuelan crude fell as low as 409,150 b/d in February 2018, the data showed.
Venezuelan oil output fell to 1.17 million b/d in December, according to the latest S&P Global Platts survey. The country's output is forecast to decline by 350,000 b/d through 2019, but, depending on sanctions and other risk factors, could fall by as much as 800,000 b/d by late this year, according to Barclays.
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