The U.S. Treasury has issued a 30-day notice to Chevron to exit Venezuela, following Trump’s commitment to reverse Biden’s concessions to Maduro. This sudden shift threatens Venezuela’s economy and U.S. heavy crude supplies, as Chevron was responsible for 20% of the country’s oil production. Immediate market reactions reflected the uncertainty created by this directive, highlighting the risks involved for both nations.
The U.S. Treasury has informed Chevron Corp. that it has 30 days to cease operations in Venezuela, drastically impacting the company’s ability to extract and sell crude oil from the sanctioned nation. This decision aligns with former President Trump’s commitment to reverse President Biden’s oil concessions to Nicolás Maduro, following the cancellation of Chevron’s sanction waiver. Consequently, this change poses significant risks for both Venezuela’s fragile economy and U.S. refineries that depend on Venezuelan crude.
Chevron has played a crucial role in Venezuela’s oil production, accounting for approximately 20% of the nation’s total output, which provided essential economic stability and foreign currency revenue—estimated at $6 billion—necessary for the country’s survival. The prior administration permitted Chevron to export 240,000 barrels of Venezuelan crude daily to U.S. refiners, benefiting Gulf Coast facilities that specialize in heavy crude. However, with the impending evictions set for April 3, this vital supply will be cut off.
The reaction from markets was swift, with Chevron’s shares dropping by 1.3%, and the prices for both WTI and Brent crude also declining as expectations adjusted. Florida Republicans have consistently criticized any engagement with Venezuela, claiming such interactions merely bolster Maduro’s regime. Trump reiterated this viewpoint, stating he is reversing Biden’s concessions, while Secretary of State Marco Rubio vowed to eliminate all Biden-era oil licenses financing Maduro’s regime.
Venezuela has condemned this recent decision as “harmful,” warning of repercussions for the U.S. and its citizens. In the absence of Chevron, Venezuela may resort to clandestine oil agreements with countries like Iran and China, reminiscent of previous practices that resulted in lost revenue and sanctions evasion. A pressing concern remains for U.S. refineries regarding alternative sources of heavy crude and the associated costs.
In summary, the U.S. Treasury’s directive to Chevron represents a significant shift in the U.S. stance toward Venezuela, threatening the latter’s already struggling economy and potentially disrupting U.S. refineries’ operations. With the potential return to clandestine dealings for Venezuela, the implications of this decision raise vital questions about future oil supplies and prices for U.S. consumers and companies.
Original Source: oilprice.com
