Venezuelan state-run oil company PDVSA has begun contacting customers with crude supply contracts amid the temporary lifting of US sanctions, two people familiar to the matter said yesterday, moving to resume cash sales to global refiners.
The US on Wednesday lifted most restrictions on Venezuela for six months for producing, selling and exporting oil to its chosen markets. The broad relaxation of sanctions imposed since 2019 following an election that Washington considered a sham will allow some Venezuelan crude to flow to customers previously barred from transactions.
The licence, issued by the US Treasury’s Office of Foreign Assets Control (OFAC), aims to encourage a fair presidential election in Venezuela next year. But it is not expected to significantly boost Venezuela’s deteriorated oil production or immediately lead to stronger exports.
PDVSA’s trading division has lost many of its skilled staff with oil traders departing due to low salaries. That loss of experience means new negotiations could take time, or produce few new export deals in the six months of the licence, according to the sources, who spoke on condition of anonymity.
Oil output in Venezuela, which boasts of the largest crude reserves worldwide, now averages 780,000 barrels per day (bpd) and the license changes could help increase PDVSA’s cash flow by at least reducing the pool of middlemen selling its oil at a discount to customers, mostly in Asia.
“The OFAC has issued an unprecedented general licence that suspends the broad siege imposed to PDVSA,” the company’s CEO and Oil Minister Pedro Tellechea said on social media.
Venezuela can now receive direct payments for goods or services under the licence issued by OFAC, which oversees American sanctions.
The payment restrictions had reduced sale proceeds to PDVSA and its joint ventures, which were authorised only to deliver cargoes to repay debt, while cash moving to Venezuela was barred. Not all US sanctions on PDVSA were lifted.
PDVSA’s earnings have been heavily curtailed by sanctions in the past four years. As its traditional customers were banned from doing business with it, the company had to sell its oil to an ever-changing group of middlemen willing to trade cargoes for large price discounts.
Since November, when Washington authorised Chevron to expand its joint ventures with PDVSA and export Venezuelan crude to the US, that agreement and a few others provided PDVSA’s only access to Western markets.
Those agreements, however, are limited to debt repayment deals, so little cash is reaching PDVSA’s coffers, constraining its ability to expand oil production and exports.
“The biggest short-term benefit, in an election year, is to sell oil at a full price to its most profitable market, the US,” Francisco Monaldi, a Latin American energy market expert at Rice University’s Baker Institute, wrote on social media.
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