Page 5 - LatAmOil Week 10 2022

LatAmOil COMMENTARY LatAmOil

This included shipping and financing and equip- complaining. They’re likely to go higher in the
ment supplies as well as crude and fuel trading near term, given that the US and the EU have
and sales. now decided to restrict their imports of Russian
crude, thereby limiting the volume of feedstock
Impact of sanctions available for refining.
Over time, the US sanctions regime has inflicted Moreover, prices could climb even higher in
serious damage on the Venezuelan economy. light of Russia’s signal that it is willing to cut off
The most recent rounds of trade restrictions oil supplies in order to retaliate against its critics.
have been particularly damaging, as they have In a move that is sure to heighten concerns about
severely limited the country’s ability to extract possible shortages, Moscow announced earlier
and monetise its most valuable resources. In this week that it intended to freeze commodity
practical terms, they have reduced Venezue- exports up until the end of this year.
lan oil production from 1.7mn barrels per day These measures and counter-measures will,
in 2018 to 560,000 bpd in 2021, a drop of more of course, also affect natural gas and LNG mar-
than 67%. kets, but that does not have much impact on
Certainly, Trump’s loss to Joe Biden in the US policy toward Caracas. However, the immi- The imminent
2020 presidential election did generate some nent reduction in Russian crude supplies does reduction in
speculation about the possibility that US policy appear to have changed Washington’s attitude
toward Venezuela might change. Biden and his considerably. Russian crude
team are generally understood to be open to the
idea of softening sanctions for humanitarian New US strategy? supplies appears
reasons, on the grounds that they have wrecked Hence the reports that a delegation of high-
the Venezuelan economy and impoverished level US officials – including Juan Gonzalez, to have changed
ordinary citizens without accomplishing their the White House’s special advisor on Latin the US attitude
goal of forcing changes in the political regime. America – travelled to Caracas during the first
Even so, the sanctions regime has mostly weekend in March for talks with the Venezue- toward Venezuela
remained in place, with minimal changes since lan leadership. The Biden administration has not
Biden took office in January 2021. This is largely commented publicly on these talks, but various considerably
because the current administration’s focus has news sources have reported that the two sides
been on domestic affairs – above all, on man- discussed the possibility of restoring Venezuela’s
aging the coronavirus (COVID-19) pandemic access to world oil markets in order to compen-
and its fallout. But it also has something to do sate for the missing Russian barrels.
with the fact that there has been little appetite in Maduro then said in a televised speech on
Washington for the kind of political wrangling March 7 that his government had “agreed to
that would inevitably follow proposals for lifting work on an agenda going forward, issues of
the trade restrictions. interest” with the US. “It seemed to me very
After all, Venezuela does not exactly inspire important to be able, face to face, [to] discuss
sympathy in the US public relations realm. It is issues of maximum interest to Venezuela and
a country governed by a socialist regime, led the world,” he remarked.
by a president who is prone to making hostile So far, these developments have not had any
remarks about the US and about its chosen concrete results. The US government has not yet
political and economic systems. And the trade lifted any specific restrictions on trade with Ven-
restrictions are backed by Senator Marco Rubio ezuela, and PdVSA has not yet taken any spe-
of Florida and other well-known Republican cific actions to exapnd production or improve
legislators with close ties to the Cuban and Ven- its crumbling infrastructure as a consequence of
ezuelan immigrant communities. recent events. However, the outlook is definitely
changing.
Energy market turmoil There may still be political battles ahead,
Now, though, there are other factors to consider. though. Rubio and other US legislators have
Russia’s invasion of Ukraine hasn’t just upset the expressed concern about the prospect of doing
geopolitical applecart; it’s also caused turmoil on business with Venezuela, with some pointing
world energy markets. out that Maduro’s regime is still engaging in
With respect to oil, Brent and WTI crude political repression and others urging the Biden
prices both topped $125 per barrel earlier this administration to focus instead on giving sup-
week, putting them more than 50% above port to US oil producers.
their starting points as of January 1, 2022. As Nevertheless, this is not the same conversa-
a result, gasoline prices are soaring through- tion that might have been happening just a few
out the Western world, and consumers are short weeks ago. ™

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