The U.S. Treasury has revoked Chevron’s ability to operate in Venezuela, which threatens the already fragile Venezuelan economy and impacts U.S. refiners reliant on its oil. Chevron accounted for a substantial share of Venezuela’s crude production, providing crucial revenue that helped stabilize the economy. With this abrupt decision, the future of heavy crude supplies for U.S. refineries is now in question.
The U.S. Treasury has issued an abrupt 30-day notice to Chevron Corp., terminating its ability to operate in Venezuela. This decision, revealed shortly after Trump’s commitment to rescind Biden’s oil concessions to Nicolás Maduro, signifies a drastic turn that threatens both Venezuela’s fragile economy and U.S. refiners dependent on Venezuelan crude oil. Typically, companies would have a standard wind-down period of six months, but Chevron must act immediately.
Chevron has been a critical player in Venezuela’s oil production, accounting for about 20% of total output and generating significant revenue for the troubled economy. The oil giant’s operations provided around $6 billion, a crucial lifeline preventing total collapse. The previous Biden administration had permitted Chevron to export 240,000 barrels daily to U.S. refineries, a support for Gulf Coast facilities equipped for processing heavy grades of crude.
As a result of the announcement, Chevron’s shares declined by 1.3%, and crude prices fell; WTI crude dropped to $67.36, while Brent fell to $70.24 as markets adjusted to the news. Florida Republicans have consistently opposed U.S. relations with Venezuela, claiming such actions bolster Maduro’s regime. Trump’s social media post reaffirmed this stance, indicating he would reverse concessions made by Biden to Maduro.
Venezuela has labeled the U.S. decision as “[harmful]” and anticipates it will inflict damage on both U.S. businesses and citizens. With Chevron’s exit, Venezuela might revert to engaging in opaque oil agreements with Iran and China, reviving issues related to sanctions evasion and lost revenue from prior dealings. The pressing concern is how U.S. refiners will source heavy crude oil without Venezuelan supplies and the potential price implications of this shift.
The U.S. Treasury’s termination of Chevron’s operations in Venezuela poses significant risks to the fragile Venezuelan economy and U.S. refiners dependent on its crude oil. With the loss of a major revenue source, Venezuela may need to turn to other nations for oil, raising uncertainties about future supply and pricing for U.S. refiners.
Original Source: oilprice.com
