The oil industry of Venezuela has had a tumultuous year under sanctions from the United States, poor refining network, supply shortages as well as ongoing political and social challenges. The situation has gone from bad to worse for the once dominant member of OPEC. According to two workers at state owned oil company Petroleos de Venezuela (PDVSA), Venezuelans have begun stealing crude from the idled oilfields and distilling homemade gasoline.
Venezuela has been suffering from a fuel shortage due to sanctions imposed by the U.S government. Iran and Venezuela are targets of United States sanctions and therefore Iran has stated its willingness to aid Venezuela as a fellow target of U.S sanctions. In August, the United States seized the cargo of four ships carrying fuel from Iran to Venezuela. Throughout this year, five Iranian vessels were set to aid in Venezuela’s shortage and earlier this year, only one of the five made it to Venezuela with the much-needed cargo. The other four never made it and the cargo of these vessels was seized by the U.S Administration, the cargo totaled 1.116 million barrels of petroleum.
The country of Venezuela has battled through tumultuous times under United States sanctions, a poor refining network has caused gasoline shortages as well as political and social upheaval. Another country that has also been under similar scrutiny and sanctions from the United States for comparison is Iran. Over the past month, Iran has sent dozens of plane loads to Venezuela, consisting of equipment and chemicals necessary to produce gasoline as well as technicians to help jumpstart the dilapidated refineries of the South American country. In addition, five Iranian tankers are currently in route to Venezuela to help improve the growing shortage of gasoline that as of last month had consumers paying close to $8 per gallon.
On Monday, Venezuelan President Nicholas Maduro appointed his economy vice president, Tareck El Aissami as his new oil minister. El Aissami’s appointment comes at a time where the country has been dealing with hyperinflation, declining oil production, shortages on basic goods and sanctions from the United States. As if things could not get any more precarious for the OPEC nation, El Aissami was recently added to the list of America’s Ten Most Wanted Fugitives on charges of drug trafficking.
The Trump administration is not expected to grant the Chevon Corporation another waiver to operate in Venezuela as the United States begins planning to increase pressure through sanctions on the regime run by Nicolas Maduro. The most recent waiver granted to Chevron is the fourth instance that has allowed Chevron to operate in the South American country since sanctions commenced in 2018. The waiver is set to expire on April 22.
Notwithstanding OPEC production cuts, Venezuela sanctions restricting crude supply to the US Gulf Coast driving the market higher, retail gasoline prices are poised to make their annual spring run. Seasonal specification changes in gasoline have a significant impact on price.
The Treasury Department of the United States placed sanctions on Venezuela’s state-owned oil company Petroleos de Venezuela, S.A (PDVSA) on January 28 in an effort to stabilize democratic order to the region and combat corruption in Venezuela.
On December 26th NYMEX low traded at $1.6205 per gallon. Since then, the price has moved higher to $0.27 per gallon moving ever closer to the $2.00 mark.
After a sharp rally to begin the year, oil prices have been trading in a tight range over the past two weeks and are waiting for their next cue to determine price direction.