US to ease Venezuela oil restrictions

Italy’s Eni and Spain’s Repsol will get the green light to start shipping Venezuelan crude to Europe from next month, Reuters has reported, citing five unnamed sources in the know. The sources cited a letter written by the U.S. State Department to Eni and Repsol, signaling that Washington’s firm stance on Venezuelan sanctions may not be so firm after all now that its strategic partners in Europe are facing a shortage of crude because of sanctions against Russia.

Yet the volumes that Eni and Repsol will be allowed to ship from Venezuela to Europe will not be significant and will only likely have a minor effect on global prices, Oil Price writes. It will also be exclusively shipped to Europe and cannot be resold elsewhere, according to them.

The U.S. began signaling a readiness to ease Venezuelan sanctions as early as March when Washington first said it would ban all Russian oil and fuel imports and then sent a delegation to Caracas to discuss oil exports.

The visit did not produce results, but two months later, the Washington Post reported that the U.S. would lift restrictions on Chevron’s business in Venezuela, allowing the supermajor to negotiate directly with the Venezuelan government and PDVSA on future production.

Venezuela is home to the largest proven oil reserves in the world but has been unable to make much of them over the last few years since the Trump administration stepped up sanction pressure on the South American country. A relaxing of sanctions could unleash another 400,000 bpd per day at a time when global crude oil consumers are scrambling for less expensive crude. 

The volumes to be allowed to go to Europe won’t be all that great, apparently, and they will not result in any more cash for the Maduro government. According to the Reuters sources, payment for the shipments would take the form of debt repayment and dividends. The shipments could start in July.