US sanctions against Venezuelan state oil company Petroleos de Venezuela SA (PDVSA) will deal a meaningful blow to President Nicolas Maduro’s administration’s cashflow, but the effects will not be as harsh as the US expects, according to Rystad Energy.
“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,” Rystad Energy analyst Paola Rodriguez-Masiu said.
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 about 1.2 million b/d, of which some 450,000 b/d goes to the US, while 300,000 b/d goes to India and 240,000 b/d to China.
Many refineries along the US 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 said.
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,” the Rystad Energy analyst said.
