US wants to allow limited Oil production in Venezuela again – Commerzbank

FXStreet Insights Team FXStreet

The US government is apparently considering allowing US Oil companies to resume limited operations in Venezuela. This was reported by five sources familiar with the matter, Commerzbank's commodity analyst Carsten Fritsch notes.

US Oil inventories are currently well below the five-year average

"As under former US President Biden, licenses are to be issued for this purpose. US President Trump had stopped this practice at the beginning of his second term. As a result, US imports of crude Oil and Oil products from Venezuela fell to 175,000 barrels per day in April, after standing at around 300,000 barrels per day at the turn of the year."

"Before sanctions were imposed on the Maduro regime during Trump's first term in 2019, US Oil imports from Venezuela amounted to more than 600,000 barrels per day. Trump's apparent U-turn could be due to the tight supply situation in the US. US crude Oil inventories are currently well below the five-year average."

"In addition, there is a shortage of heavy crude Oil with high sulfur content, which US refineries need as an additive to light, low-sulfur US shale Oil for processing. Oil from Venezuela meets this requirement. Oil exports from Venezuela are to be handled through swaps to prevent the export revenues from ending up in Venezuela's coffers. It remains to be seen whether Venezuela will agree to this."

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