Traders are still weighing the timing and impact of U.S. President Joe Biden’s decision on Saturday to ease oil sanctions on Venezuela and grant Chevron a license to resume oil production in the country.
Sanctions were implemented in August 2019 by the Trump administration, and Biden’s decision to ease those sanctions came after talks resumed over the weekend between the socialist government of Nicolas Maduro and the Venezuelan opposition. Those talks led on Sunday to the signing of a US-brokered agreement between the government and the opposition to resolve the country’s political unrest.
Chevron has now obtained a six-month license to resume oil pumping and generate oil revenues. Under the limited authorization, profits from the sale of oil and petroleum products would be used to pay down Chevron’s debt and not to increase the profits of state-owned PDVSA.
Chevron is the only American oil company active in Venezuela.
The market is now wondering if this will have a significant impact on global oil production or if it is more about advancing Washington’s agenda regarding the 2024 presidential elections.
Chevron’s six-month license is unlikely to increase Venezuela’s oil production by much or quickly. In October, Bloomberg quoted Chevron CEO Mike Wirth as saying it could take “months and years to begin maintaining and refurbishing fields and equipment and changing any investment activity.”
Washington has suggested that the intention behind the easing of sanctions was not to create an alternative to sanctioned Russian oil and was unlikely to impact oil prices.
Further decisions on sanctions against Venezuela will depend on Maduro honoring the commitments he made in the “social contract” signed on Sunday with the opposition, according to senior administration officials, as reported by the Associated Press.
By Charles Kennedy for Oilprice.com
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