Tanker Markets Watch as U.S. Suspends Sanctions on Venezuelan Oil and Gas

oil tankers
Iranian tankers arriving in Venezuela maintaining the trade oil and products during the sanctions (PDVSA/Twitter 2020

Published Oct 19, 2023 1:41 PM by The Maritime Executive

In response to the signing of agreements designed to restore free elections in Venezuela, the U.S. Treasury Department announced an initial six-month suspension of sanctions including on Venezuela’s oil and gas industry. It was also hoped that the move would provide greater stability to the global oil market which has been on edge due to the Israel-Hamas war and the potential of further widening of tensions in the Middle East.

“Consistent with U.S. sanctions policy, in response to these democratic developments, the U.S. Department of the Treasury has issued General Licenses authorizing transactions involving Venezuela’s oil and gas sector and gold sector, as well as removing the ban on secondary trading,” said Brian Nelson, Under Secretary of the Treasury for Terrorism and Financial Intelligence in a prepared statement. 

The U.S. Treasury Department, however, cautioned that it would be monitoring and was prepared to amend or revoke authorizations if Venezuela failed to follow through on the agreements that were reached in Barbados and supported by Canada, the EU, and the UK. The move authorizes transactions involving oil and gas for the next six months. Treasury said it would be renewed if the government of Venezuelan President Nicolás Maduro meets its commitments under the election roadmap as well as other commitments with respect to those who are wrongfully detailed. Other sanctions however remain in place.

The move comes at a time when the global tanker market is already beginning what most observers believe is a strong upcycle. While the agreement provides a relatively short window, with capacity already constrained and demand high in the crude oil tanker segment, the suspension of the sanctions is seen as another positive step for the tanker market.

The price of oil on the global markets initially remained stable after the U.S. announcement. Oil continues to hover around the $90 a barrel level. 

Analysts cited by Bloomberg estimated that Venezuela could add as much as 200,000 barrels per day of crude oil to the global markets. Venezuela’s current output is reported by Reuters to be averaging 780,000 barrels per day. Reuters however cites experts saying that they doubted Venezuela could quickly expand oil output.

Under the new licenses issued by the United States, Venezuela will be able to receive direct payments for its oil. Previously they were limited only to monies used for debt repayments, although nearly a year ago the U.S. took some limited steps to ease the restrictions. Chevron was authorized in November 2022 to expand its joint venture with the Venezuelan state-run oil company PDVSA. 

Since the U.S. imposed secondary sanctions on Venezuela four years ago, the main customer for Venezuelan oil has been China. Reuters reports however that most of the oil has gone to smaller refineries in China as both CNPC and PetroChina stated they have not imported Venezuelan oil since 2020. Despite that, estimates are that China has been buying as much as 430,000 barrels per day of Venezuelan oil.

Analysts following the tanker market remained cautious noting that Venezuela has to meet conditions for the suspension to remain in place.  By the end of November, the Maduro government must withdraw bans on opposition political candidates and parties and release political prisoners. Reuters reports the government made a good-faith gesture by immediately releasing some detainers.