The following is our translation from RIA Novosti. Note that the info sources are all American.
Boomerang effect: sanctions against Venezuela hit US oil workers
MOSCOW, February 6 - RIA Novosti, Natalia Dembinskaya. Refiners in the United States spend billions on heavy grades of oil, and thanks to sanctions imposed by Trump against Venezuela, are forced to rush out looking for other suppliers. But the crude quantities may simply not be enough: given the production cutbacks within OPEC, the market is facing a shortage. As a result, according to analysts, the largest American oil companies will suffer the most from sanctions.
Asked not to interfere
Back in January, oilmen asked Trump not to restrict oil imports from Venezuela. India, Russia and China will continue to buy Venezuelan crude, and a unilateral ban will put American refiners in a deliberately disadvantaged position, they explained.
But the administration stated that the sanctions are unavoidable, and recommended seeking alternative sources of heavy oil.
The fact is, the technology of US refineries does not allow using only light oil coming from the Perm Basin and West Texas. It must be mixed with heavy crude, imported mainly from Venezuela.
Producers who have invested billions to profit from the processing of cheap low-quality crude are now paying fabulous premiums for high-sulfur oil. This is a boon to OPEC members like Iraq and Saudi Arabia: not so much light low-sulfur oil is produced there, but there are no problems with heavy grades.
Nothing to replace it with
Analysts warn: the crisis in Venezuela, along with the cut-back in OPEC production, will only increase the imbalance in the market. The South American republic exports one of the heaviest grades of oil in the world, and the sanctions have practically blocked this channel. Oil refining companies that are left without crude oil really need to urgently look for alternative suppliers.
However, there is no telling that the search will be crowned with success. Mexico already increased shipments to the eastern states last year, surpassing Venezuela. Ecuadorian and Colombian oil goes to the west coast. And now, refineries will have to fight with each other over crude oil.
Market players admit they do not have enough oil, and so far there is nothing to replace the Venezuelan supplies that have been dropped.
“There have been significant gaps in the plan for the next month. The problem is that we are not getting anything from Venezuela,” said Gary Simmons, head of the largest US oil company, Valero Energy Corp, to investors.
Experts emphasize that all this is a direct result of the White House’s actions. Saudi Arabia, Russia and Canada are cutting production, sanctions are forcing Iran and Venezuela to curb exports, and the market for low-quality crude oil is on the verge of a crisis.
"In the real crude oil market, tensions continue to be felt, due to the acute shortage of high-sulfur crude oil," said Amrita Sen, lead analyst for the oil market, consulting firm Energy Aspect.
The main victims
Refineries of the Gulf of Mexico and the East Coast, designed for processing heavy oil, are facing the most difficult situation.
"Venezuela is very important for the market - it's not so much about the volumes, but about the quality of the oil of American companies. Oil refineries on the Gulf coast will suffer most from the sanctions," say Rystad Energy analysts.
Among those who suffer the greatest losses are the main players in the US oil industry.
Heading the list is Houston Citgo Petroleum, the American division of the Venezuelan PDVSA, managing refineries, pipelines and terminals.
According to the International Energy Agency, Citgo is the largest importer of Venezuelan oil (according to last year’s results, 176 thousand barrels per day). Valero Energy has the second largest output (166 thousand barrels per day), and Chevron Corp has the third largest (83 thousand barrels per day).
According to Bloomberg, the shortage of Venezuelan sour crude oil has already led to a sharp rise in commodity prices in the region. In late January, Mars Blend crude went up to a five-year high, while the profitability of refining Mexican oil fell to a four-year minimum.
If American refiners do not find an affordable replacement for Venezuelan crude, they will have to drastically reduce production rates. And this, in turn, will cause a fuel price hike, which will hurt Trump's rating.