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US Sanctions to Venezuela Increased Oil Prices

Oil prices boost more than 2 percent on Tuesday after the United States imposed sanctions on Venezuela’s state-owned oil firm PDVSA, which is expected to limit crude exports from member countries of the Organization of Petroleum Exporting Countries (OPEC). The Trump administration restrictions on Venezuelan crude focused at driving President Nicolas Maduro and his regime to drop out of power and consequently banning US companies from buying oil from the Latin American countries. However, proceeds from such sales will be put in a “blocked account” that should deter PDVSA from shipping crude to the United States.

After imposing sanctions on PDVSA, US refinery must look for the supply of oil from other countries such as Mexico, Saudi Arabia, and Iraq to meet the needs of crude. This would lead to a surge in oil prices. According to Refinitiv ship-tracking data and trade sources, Venezuela’s exports fell to little more than 1 million barrels per day (bpd) in 2018 from 1.6 million bpd in 2017. Petromatrix estimated that Venezuelan exports will drop by about 500,000 barrels per day under current conditions.

The oil industry is also worried that crude demand could stutter, followed by the trade war between Washington and Beijing slowing the global economic growth. In China, a top oil importer, signs of slowdown have emerged. Activity in its vast manufacturing sector is expected to shrink for the second straight month in January, a Reuters poll showed.




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