Commodity Giants Are Back To Trading Venezuela’s Oil

Commodity Giants Are Back To Trading Venezuela’s Oil

  • Some of the largest independent oil trading houses are back offering Venezuelan cargoes.
  • Gunvor and another commodity trading giant, Trafigura, have accessed Venezuelan cargoes in recent weeks after buying crude from intermediaries approved by PDVSA.
  • EIA: Joint ventures operated by Eni, Repsol, and Maurel & Prom could increase production by an additional 50,000 bpd in the near term.

Weeks after the U.S. eased the sanctions on Venezuela, essentially allowing exports of Venezuelan crude, commodity trading giants are back in the business of trading with oil from the country with the world’s largest reserves.

Some of the largest independent oil trading houses are already offering Venezuelan cargoes, including to U.S. buyers. Commodity giants have also struck deals to buy crude from intermediaries approved by Venezuela’s state-owned oil company PDVSA.

The easing of the sanctions has allowed the world’s biggest oil traders to return to Venezuela, while the country is also reportedly negotiating with international oilfield services providers to help it ramp up production.

Increased supply from Venezuela is set to shift global oil market balances—to an extent—as more crude will be flowing from the Latin American country, at least until April next year.

In October, the United States lifted most sanctions on Venezuela’s oil industry after the Nicolas Maduro government reached a deal with the opposition that could see elections held next year.

The U.S. issued a six-month general license temporarily authorizing transactions involving the oil and gas sector in Venezuela. The license will only be renewed if Venezuela meets its commitments under the so-called electoral roadmap, the U.S. Treasury noted.

The license, valid until April 18, 2024, authorizes the production, lifting, sale, and exportation of oil or gas from Venezuela, and the provision of related goods and services, as well as payment of invoices for goods or services related to oil or gas sector operations in Venezuela. Authorization is also granted to new investments in oil or gas in Venezuela.

Until the sanctions relief was issued, Chevron was the only Western supermajor with special authorization to operate oil fields and export crude from Venezuela under a special license issued by the Biden Administration late last year.

Now that other companies are allowed to return to Venezuela’s crude trade, Gunvor Group was the first of the biggest trading houses to offer to U.S. refiners a supertanker of Venezuelan crude, according to sources familiar with the matter who spoke to Bloomberg

Gunvor and another commodity trading giant, Trafigura, have accessed Venezuelan cargoes in recent weeks after buying crude from intermediaries approved by PDVSA, Reuters reported this week, citing company documents and four people with knowledge of the deals.

In the days after the sanctions were eased, Trafigura also negotiated a chartering contract for a Suezmax vessel to ship 1 million barrels of Venezuelan fuel oil in November from the Amuay ship-to-ship area, two people close to the deal told Reuters.

Apart from trading houses, international oil firms and oil services providers are also in talks with PDVSA to receive Venezuelan cargoes and to boost Venezuela’s oil production now that crude trade is no longer a sanctionable offense.

PDVSA is reportedly discussing hiring equipment and services from oilfield services suppliers to help it ramp up crude oil production.

While Venezuela is set to raise legitimate oil exports now that Western firms are allowed to trade and import its crude, it will face an uphill battle in increasing its oil production.

Venezuela is expected to raise its crude oil production by less than 200,000 barrels per day (bpd) until the end of 2024 as years of underinvestment and mismanagement will hamper rapid output growth, the U.S. Energy Information Administration (EIA) said last month.

Venezuela’s crude oil production, at 735,000 bpd in September 2023, per EIA estimates, is unlikely to jump above 900,000 bpd by the end of 2024, the administration reckons. Most of the near-term growth is expected to come from Chevron’s joint ventures, which could raise production to 200,000 bpd by the end of 2024 from 135,000 bpd in 2023, according to the EIA.

Joint ventures operated by Eni, Repsol, and Maurel & Prom could increase production by an additional 50,000 bpd in the near term, according to IPD Latin America cited by the EIA. As a result, Venezuela’s total crude oil production could grow to about 900,000 bpd by the end of 2024.

By Tsvetana Paraskova for Oilprice.com

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