Caracas and Washington have reached an agreement to export up to $2 billion worth of Venezuelan crude oil to the United States, as announced by U.S. President Donald Trump on Tuesday. This significant negotiation aims to redirect supplies from China while assisting Venezuela in avoiding further oil production reductions.
This deal signifies a positive response from the Venezuelan government to President Trump’s demand for opening up the country’s oil sector to U.S. companies, under the threat of increased military intervention. Trump has expressed his desire for interim President Delcy Rodriguez to grant U.S. and private companies “total access” to Venezuela’s oil industry.
Venezuela is currently unable to ship millions of barrels of oil stored in tankers and storage tanks due to a U.S.-imposed export blockade since mid-December. This blockade was part of escalating U.S. pressure on Venezuelan President Nicolas Maduro’s government, which culminated in Maduro’s capture by U.S. forces over the weekend. Top Venezuelan officials have labeled this capture as a kidnapping and accused the U.S. of attempting to seize the nation’s extensive oil reserves.
President Trump revealed in a social media post that Venezuela will “turn over” between 30 and 50 million barrels of “sanctioned oil” to the United States. “This oil will be sold at its market price, and that money will be controlled by me, as President of the United States of America, to ensure it is used to benefit the people of Venezuela and the United States,” he added.
U.S. Energy Secretary Chris Wright has been tasked with implementing the deal, with plans to transport the oil from ships directly to U.S. ports. Initially, supplying the U.S. with the trapped crude may necessitate reallocating shipments originally destined for China, according to sources. China has been a major buyer of Venezuelan oil over the past decade, particularly since the U.S. imposed sanctions on companies trading oil with Venezuela in 2020.
“Trump wants this to happen early so he can say it is a big win,” an industry insider commented.
Neither Venezuelan government officials nor PDVSA have provided comments on the matter.
Following Trump’s announcement, U.S. crude prices fell by more than 1.5%, as the agreement is expected to boost Venezuelan oil exports to the U.S. Currently, the oil flow is completely controlled by Chevron, PDVSA’s principal joint venture partner, under a U.S. authorization. Chevron has been consistently exporting between 100,000 and 150,000 barrels per day of Venezuelan oil to the U.S., despite the blockade.
It remains unclear whether Venezuela will access any proceeds from this supply, given the sanctions that exclude PDVSA from the global financial system, freeze its bank accounts, and prevent transactions in U.S. dollars.
Venezuela has been selling its Merey crude grade at approximately $22 per barrel below Brent for delivery at Venezuelan ports, valuing the deal at up to $1.9 billion. Interim President Rodriguez, sworn in on Monday, is herself under U.S. sanctions imposed in 2018 for undermining democracy.
This week, Venezuelan and U.S. officials discussed potential sales mechanisms, including auctions for U.S. buyers to bid on cargoes and issuing U.S. licenses to PDVSA’s business partners, potentially leading to supply contracts. These licenses have previously enabled PDVSA’s joint venture partners and customers, including Chevron, India’s Reliance, China National Petroleum Corporation (CNPC), and European firms Eni and Repsol, to access Venezuelan oil for refining or resale to third parties.
Preparations for receiving Venezuelan cargoes have already begun among some of these companies, according to separate sources. Discussions have also touched on the potential use of Venezuelan oil in the U.S. Strategic Petroleum Reserve, though Trump did not mention this possibility.
U.S. Interior Secretary Doug Burgum remarked on Tuesday that increased Venezuelan heavy oil flows to the U.S. Gulf would be “great news” for job security, future gasoline prices, and Venezuela’s economic prospects. “Venezuela has an opportunity now to actually have capital come in and rebuild their economy and take advantage,” he told Fox News. “With American technology, American partnership, Venezuela can be transformed.”
Before the initial imposition of U.S. energy sanctions on Venezuela, Gulf Coast refineries were processing around 500,000 barrels per day of Venezuela’s heavy crude. Due to the embargo, PDVSA has already had to cut production as it runs out of storage space. Without a means to export oil soon, further production cuts would be necessary, according to a source.
Oil traders responded to news of the deal talks, with differentials for certain heavy oil grades in the U.S. Gulf dropping about 50 cents per barrel on Tuesday, anticipating increased Venezuelan supplies.
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