Washington — The Trump administration announced Monday that it will sanction PDVSA, Venezuela's state-owned oil company, a move that could suspend roughly 500,000 b/d of Venezuelan crude exports to US Gulf Coast refineries and shut down US exports of diluents to the South American nation.
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US Treasury Secretary Steven Mnuchin attempted to downplay the impact of these sanctions on the oil market, claiming they were unlikely to have any impact on domestic gasoline prices. He said that Venezuelan oil comprises a "rather moderate portion" of US supply and that US refiners have largely reduced their imports of Venezuelan crude as sanctions loomed.
"We're very comfortable that [US refiners] have enough supply that we don't expect any big impact in the short term," Mnuchin said during a White House briefing Monday.
Under the sanctions, payments for US imports of Venezuelan crude will need to be placed into blocked accounts in the US, Mnuchin said. PDVSA-owned Citgo assets in the US, which include refineries in Louisiana, Texas and Illinois, will be allowed to continue to operate, although revenues also will be required to be held in blocked accounts, Mnuchin said.
The sanctions are aimed at keeping oil revenues from the regime of Venezuelan President Nicolas Maduro, Mnuchin said.
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"Today's designation of PDVSA will help prevent further diverting of Venezuela's assets by Maduro and preserve these assets for the people of Venezuela," Mnuchin said in a statement. "The path to sanctions relief for PDVSA is through the expeditious transfer of control to the interim president or a subsequent, democratically elected government."
By sanctioning PDVSA, the US will "prevent the illegitimate former Maduro regime from further plundering Venezuela's assets and natural resources," Secretary of State Mike Pompeo said in a statement.
The Trump administration Wednesday officially recognized Venezuelan opposition leader Juan Guaido as the legitimate president of Venezuela.
Joe McMonigle, an analyst with Hedgeye Risk Management, called the sanctions Monday a "de facto oil ban to the US." He said he expected additional steps, including broader, global sanctions, to be announced in coming days. "I think the administration is doing oil sanctions reluctantly and well aware of the impact to US refiners and potentially gasoline prices but feel it is a necessary steps to implement their policy to choke off cash from Maduro," McMonigle said.
Last week, analysts said that if sanctions on Venezuelan oil were imposed, flows of heavy crudes into the US are most likely to increase from Mexico, Canada, Saudi Arabia and Iraq to replace those lost barrels from Venezuela.
Mnuchin said Monday that Middle East producers would be "happy" to fill any potential supply gap the PDVSA sanctions caused.
US imports of Venezuelan crude averaged about 574,000 b/d in December, down roughly 40% from July 2016, when US refiners imported more than 850,700 b/d, according to US Customs and Border Protection data. US imports of Venezuelan crude fell as low as 409,150 b/d in February 2018, the data showed.
Venezuelan oil output fell to 1.17 million b/d in December, according to the latest S&P Global Platts survey. The country's output is forecast to decline by 350,000 b/d through 2019, but, depending on sanctions and other risk factors, could fall by as much as 800,000 b/d by late this year, according to Barclays.
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