Washington — US sanctions on Venezuela's oil sector have so far had modest global price impacts as crude production and refinery flows in the US and elsewhere adjust to the supply disruption, the head of the Energy Information Administration told Congress Tuesday.
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"We're seeing that adjustments are being made," EIA Administrator Linda Capuano told the Senate Energy and Natural Resources Committee. "While prices are changing modestly, things are happening."
Capuano said market observers should expect EIA to adjust its supply and demand forecasts in the monthly Short-Term Energy Outlook reports as the Venezuelan situation unfolds. The next STEO report is scheduled to be published February 12.
US Gulf Coast refiners that have relied on Venezuelan imports are finding other sources of heavy crude, including Canada, Capuano said.
Kevin Book, managing director of ClearView Energy Partners, told the same Senate panel that the latest Venezuelan sanctions have hurt refiners' margins slightly as they source replacement heavy crude barrels. However, the US sanctions would cause a more significant price impact if overall supply drops sharply.
"If the sanctions have an unexpected effect of shutting down production at a far greater rate, then it isn't just a question of Venezuelan barrels not coming to the US," Book said. "It actually becomes a question of Venezuelan barrels not going into the world."
In that "shortfall environment," the heavy crude price would rise further and this would ripple throughout the whole petroleum pricing structure.
"Because in general, there's going to be less product in the world and folks are going to have to bid for it," Book said.
The price effect could still be "very modest," given numerous other dynamics including a potential release from the US Strategic Petroleum Reserve and increased production by OPEC, Book said.
The US has effectively banned both Venezuelan crude exports to the US and US diluent exports to Venezuela through sanctions announced against state-owned oil company PDVSA on January 28.
EIA estimated Venezuelan oil production was 1.25 million b/d in December, according to the last STEO report, released in January, down 390,000 b/d from December 2017 and down more than 1 million b/d below the 2011-2015 average output of 2.4 million b/d.
S&P Global Platts estimates Venezuela's December output was 1.17 million b/d.
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