The removal of sanctions was highly anticipated, though not without criticism as some had hoped for more concrete commitments from the government of Venezuela’s authoritarian President Nicolas Maduro before the Biden administration would ease up on its financial vises.

The agreement, signed Wednesday in Bridgetown, Barbados, between Venezuela and the opposition Unitary Platform, stipulates for a presidential election to be held in the second half of 2024 with international election observers and media permitted to oversee the process.

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Source: https://www.upi.com/Top_News/US/2023/10/19/Venezuela-sanctions-relief/3541697687446/

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Source: https://www.theblaze.com/news/oil-prices-drop-below-0-for-the-first-time-in-history

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In early March, Russia and OPEC failed to agree on how their deal to cut oil production should work: OPEC wanted to deepen the cuts while Moscow proposed extending existing curbs. The disagreement came at a time when global demand was slumping because of the impact of the coronavirus pandemic.

Oil prices fell from nearly $50 per barrel on March 6 when the deal collapsed to below $27 on Friday, as Saudi Arabia, the top OPEC player, and Russia, the world’s second-biggest oil exporter after Riyadh, prepare to open the taps from April 1.

“Russian position was never about triggering an oil price fall. This is purely our Arab partners initiative,” Andrei Belousov, Russian first deputy prime minister, was quoted as saying by TASS late on Saturday.

“Even oil companies who are obviously interested to maintain their markets did not have a stance that the deal (OPEC+) should be dissolved.”

Belousov reiterated that Russia was proposing to extend the existing curbs by at least one more quarter and potentially until the end of 2020. “But (our) Arab partners took a different stance,” TASS quoted him as saying.

Igor Sechin, head of Russia’s top oil producer Rosneft (ROSN.MM), has always opposed the three-year-long deal, saying it allows non-members such as the United States to increase their market share at expense of whose cutting supply.

“Is there a point to cut further if other producers will increase?”, Sechin was quoted as saying on Friday in his first public comments since the deal fell apart.

Sechin said he believed that global oil prices could return to $60 per barrel by end-2020 if shale oil is forced out of the market. Belousov believes that oil prices will balance at around $35-40 per barrel.

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Graph 1. Venezuelan Crude Exports in 2017-2019 (million barrels per day).

Source: Thomson Reuters.

Let’s start first with crude and exports thereof. Bouncing back from a string of blackouts, outages, and fires, PDVSA managed to bring back its oil output to levels unseen since February-March 2019 (i.e. the December average stands so far at 0.91mbpd). This move corresponds with China’s return to official dealings with PDVSA or the intermediary Rosneft, without resorting to the exotic practice of new Malaysian blends. Increased production volumes also mean quicker paying-off of debts for PDVSA – as of Q3 2019 the Venezuelan NOC’s debt to Rosneft shrank to 800 million, implying that by the summer of 2020 PDVSA would fully absolve itself of all arrears vis-à-vis the main marketer of Venezuelan crudes now.

Although no Venezuelan crude reaches Russia in terms of actual exported barrels (see Graph 2), the increased role of the Russian national oil company has in many ways signaled the way forward for PDVSA, perhaps even inadvertently against its own will. Whilst previously PDVSA took great pride in operating all aspects of upstream projects, its still-existing joint ventures with Rosneft, Repsol, CNPC or Chevron have witnessed a tacit transfer of competences and responsibilities to its JV partners. Boosting JV production has a manifest advantage over other options for PDVSA – equity barrels are not subject to US sanctions (as well as debt repayments, however, these effectively bar Venezuela from receiving much-needed currency, whatever denomination it might be).Related: Is The Shale Boom Running On Fumes?

Graph 2. Venezuela’s Crude Exports by Main Export Outlets in 2018-2019 (million barrels per day).

Source: Thomson Reuters.

The January 2020 parliamentary vote might alter the abovementioned trends, primarily by making Venezuela a hotly contested topic again. The head of the Venezuelan National Assembly Juan Guaidó will be markedly backed by the US Administration, yet with no tangible successes to showcase – the army and internal services have remained under Maduro’s control, moreover, the opposition remains marred by corruption claims – he might have an even more difficult time than in 2017. Moreover, President Trump’s special envoy for Venezuela Elliott Abrams has vowed to tighten the sanctions regime yet a pronouncedly more aggressive US policy would only bring grist to Maduro’s mill.

As difficult as it may seem to put forward any forecasts for Venezuela in 2020, there exist several factors that would seem to augur a more favorable environment for Nicolás Maduro. First of all, the Maduro government has managed to slow down the exorbitant hyperinflation spiral, with the year-end inflation level for 2019 settling around 7-8 000 percent, a palpable difference compared to the 2018 level of 130 000 percent (the IMF anticipated hyperinflation at 10 million percent in 2019). This has been primarily attained by means of informal dollarization of the Venezuelan economy, whereby the American currency serves as the de facto price reference for goods. As PDVSA pays off its Rosneft debt and exports an increasing amount of crude to Asia, there should be an ever-increasing number of greenbacks in Venezuela. Related: Why The Saudis Suddenly Agreed To This Mega Oil Deal

Given that the Venezuelan Central Bank only holds hard currency to an estimated amount of $7.5 billion and that the economy is still some 90 percent dependent on oil income, Maduro’s primordial goal is to make sure that the crude exports are not cut short. As stated earlier, the upcoming National Assembly ballot on the future of Juan Guaidó (which will take place January 05, 2020) might jeopardize this goal – if the opposition leader is to keep or fortify his standing within the Venezuelan parliamentary system, despite arbitrary detainment of several opposition lawmakers, the current legal limbo might continue. Yet should Maduro gain the upper hand, the White House will surely ratchet up pressure on PDVSA and all its international partners.

Graph 3. Venezuela’s Refinery Runs in 2017-2019 (thousand barrels per day).

Source: OilX.

In the meantime, PDVSA still faces an upward battle to keep the company afloat – one need not look any further than the NOC’s desolate downstream segment, completely irresponsive to the relative rebound in Venezuela’s economic stature. After a year mired with blackouts and electricity shortages, following which much of the country’s downstream capacity has been rendered unusable (the 310kbpd Cardon refinery, part of the Paraguana Refinery Complex, remains offline up to the present day), refinery runs are still at 0.21-0.22mbpd, i.e. some 17 percent of PDVSA’s aggregate refining capacity (see Graph 3). PDVSA has tried to attract Indian investors for the task of revamping its decrepit refineries, signing a 5-year deal with an Indian consortium this November yet the actual results thereof are still to be seen.

As 2020 approaches President Maduro, the ultimate survival artist of our generation is bound to confront a new set of challenges. He has managed to clear several roadblocks in the past twelve months – easing inflation (effectively renouncing on his previous economic policy), boosting exports and paying pack debt wherever it is due. PDVSA cargoes are moving to China and India, with Singapore and Togo ship-to-ship transfers ending up in the same region complementing direct sales, moreover, PDVSA and Rosneft have found a modus operandi with crude shippers. Still, the landscape is murky for Maduro – the refinery segment is struggling for life, upstream’s long-term prospects are void without Chinese, Indian and Russian help, moreover, further US sanctions might be slapped on him anytime.

Source: https://oilprice.com/Energy/Energy-General/Venezuela-Is-Quietly-Ramping-Up-Oil-Production.html

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Crude rallied after Saudi Arabia said its oil tankers were attacked on Sunday, adding to the mounting geopolitical risks in the market.

Brent in London added as much as 2.2%. Saudi Arabia said two of its tankers were damaged in “a sabotage attack” while sailing toward the Persian Gulf, though no one has yet claimed responsibility. Separately, China announced it will raise tariffs on some U.S. goods from June 1 following Washington’s decision to increase levies on $200 billion of Chinese goods Friday, escalating a prolonged trade war.

The tanker attacks are a signal of the growing political risk in the oil market since the U.S. ended waivers for crude purchases from Iran earlier this month. Prices had been struggling in recent weeks against a backdrop of increasing trade tensions between the U.S. and China, which damped the macroeconomic outlook. However, the geopolitical risk in the Middle East, coupled with outages from the North Sea to Venezuela, are now buoying prices.

“The oil market is reacting very sensitively to supply disruption risks considering the market is already tight,” said Giovanni Staunovo, an analyst at UBS Group AG. “Any additional disruption would further tighten the oil market.”

Brent crude for July settlement rose $1.24 at $71.86 a barrel on the London-based ICE Futures Europe exchange at 1:58 p.m. local time. It fell 0.3% last week. The global benchmark is trading at a $9.15 premium to West Texas Intermediate crude.

WTI for June delivery increased 87 cents to $62.53 a barrel on the New York Mercantile Exchange. The contract lost 0.5% last week.

Persian Gulf

The Saudi tankers were damaged while heading toward the Persian Gulf, the state-run Saudi Press Agency reported. The U.S. has deployed an aircraft carrier, bomber planes and defense missiles in the region amid rising tensions with Iran, which has threatened to block the Strait of Hormuz, the world’s most important choke-point for oil.

Adding to the production concerns was an outage at a field in the Norwegian North Sea last week that affects around 6% of the country’s total oil output. That disruption saw timespreads in the Brent market — a gauge of supply tightness — surge late last week, reaching more than $1 a barrel on Friday.

President Donald Trump on Monday again accused China of backing out of a deal that was taking shape with U.S. officials, saying Beijing reneged on an agreement to enshrine a wide range of reforms in Chinese law. China plans to raise tariffs on some U.S. good from June sent futures on the S&P 500 equity index lower. The Stoxx Europe 600 index was also dragged down.

— With assistance by James Thornhill, and Sharon Cho

Source: https://www.bloomberg.com/news/articles/2019-05-12/oil-dragged-down-with-global-equities-as-trade-war-escalates

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