US says Venezuela sanctions to continue despite risks

US humanitarian and political priorities in Venezuela justify continued use of sanctions curbing the country's oil sector despite the risks to US refiners and other industries, US energy secretary Rick Perry said today.

Venezuela's heavy, sour oil production has hastened its decline under US sanctions, raising prices for sour crude favored by complex refineries worldwide.

"The bigger concern for us is obviously the citizens of Venezuela," Perry said on the sidelines of the IHS-CERAWeek conference in Houston today. "The horrific conditions they find themselves in, the economy is being devastated by the leaders who have clearly demonstrated they do not care about the citizens of the country."

Venezuela's oil production was already falling as a result of mismanagement and an exodus of personnel years before the US imposed sanctions on state-owned PdV on 28 January. The decline accelerated since then. The combined loss of heavy and medium sour crude supplies in the global markets from US sanctions on Iran and Venezuela, as well as Opec production cuts, is forecast to average 1.8mn b/d in the first half of this year.

Venezuela had been producing around 950,000 b/d of crude — less than half the levels seen in 2017 — before its upstream and downstream operations mostly shut down after a catastrophic nationwide blackout hit the country on 7 March.

US refiners are expected to wind down purchases from Venezuela by 28 April. Imports from Venezuela already are falling fast. The administration also says it does not plan to extend waivers from US sanctions targeting Iranian crude, which expire in early May.

The US administration says global oil supply remains robust ahead of expiration of waivers from US sanctions targeting Iranian crude, despite an emerging structural shift in the market. IEA executive director Fatih Birol today backed that view. "There is enough oil in the market," he said. "If there are further falls (in output), in the current context it can be well supplied."

The IEA in its Oil 2019 report released today projected that Venezuela's oil production capacity will fall to 750,000 b/d this year and stay at that level through 2024. It will take a change in political and investment regimes to attract the capital required to rebuild the Venezuelan oil industry, as well as the return of PdV specialists who have emigrated in recent years, Birol said.

The purpose of US sanctions is to force Venezuelan president Nicolas Maduro to yield power to National Assembly speaker Juan Guaido, whom Washington and most of the countries in the western hemisphere and Europe recognize as Venezuela's interim leader. US officials have sought to lower expectations of an imminent political transition in Caracas, hoping that the financial pressure from sanctions, the promise of humanitarian aid and Guaido's campaign of political rallies would sway the country's senior military leaders to abandon Maduro.

"Until there is a change of leadership, being able to get their oil and gas production in the positive direction is going to be threatened," Perry said. "The US stands ready to assist the people of Venezuela to get that country back in a positive direction from the standpoint of their economy, and that is based upon their oil and gas industry."