Venezuela Sanctions Will be Weaker Than Expected
The recently announced U.S. sanctions against PDVSA will deal a meaningful blow to the Maduro administration’s cashflow, but the effects will not be as harsh as the United States expects, according to Rystad Energy Analyst Paola Rodriguez-Masiu.
“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,” Rodriguez-Masiu said in a statement sent to Rigzone.
“The oil that Venezuela currently exports to the United States will be diverted to other countries and sold at lower prices. For countries like China and India … [Monday’s] news was akin to Black Monday. They will be able to pick up these oil volumes at great discounts,” the Rystad Energy analyst added.
In the statement, Rodriguez-Masiu warned that the sanctions will affect refinery margins in the United States and said U.S. refiners “will be amongst the biggest losers”.
Looking at the effect of the sanctions on the oil market, Rodriguez-Masiu said the market “has priced in the Venezuelan crisis”. Fitch Solutions told Rigzone it believes the latest expansion of sanctions to include PDVSA will provide “a small positive upside to oil prices in the near term”.
Ashley Kelty, an oil and gas research analyst at Cantor Fitzgerald Europe, revealed to Rigzone Tuesday he thinks the sanctions may have an impact on West Texas Intermediate (WTI) prices, “given that the United States is the biggest market for Venezuelan crudes”.
“A short-term tightening of supply should lift WTI. However, with rising U.S. output still weighing heavily on sentiment, I’d be surprised if the impact was material. The Chinese economic slowdown is the biggest factor in pricing at the moment in my opinion,” Kelty told Rigzone yesterday.
The Trump administration recently issued new sanctions on Venezuela’s state-owned oil company PDVSA that effectively block Maduro’s regime from exporting crude to the United States.
Maduro branded U.S. sanctions “illegal, criminal and immoral” in a statement posted on his official Twitter page, which was translated. In the translated statement, Maduro said the sanctions “intend to rob the CITGO company from Venezuelans” and warned “we will announce necessary and forceful measures to protect the interests of the nation”.
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