India's Reliance Industries Receives U.S. Approval to Import Oil from Venezuela

Oil prices remained steady in Asian trade after a 3% drop due to fears of higher US interest rates and a larger-than-expected build in US inventories. The US government has decided to reimpose oil sanctions on Venezuela after President Nicolas Maduro failed to hold national elections. However, officials indicated that they still hope the country will hold fair elections. Venezuela's oil exports grew 12% in 2023 to about 700,000 barrels per day. The US also saw a substantial build in inventories, but a draw in gasoline inventories showed strong fuel demand. Concerns over higher US interest rates and a stronger dollar also weighed on oil prices. [b69cb7e5]

In addition to the Venezuela oil sanctions, the European Union has decided to step up sanctions against Iran to prevent a wider conflict. The EU's decision comes as the US House of Representatives prepares to vote on aid packages for Ukraine, Israel, and the Indo-Pacific. JP Morgan estimates that worldwide oil consumption in April is 200,000 barrels per day below its forecast. Oil prices had previously slid 3% in the previous session on demand worries. [00a05524]

Venezuela has lost its key U.S. license that allowed it to export oil to markets worldwide and secure investment. The loss of license 44, which eased oil sanctions since October 2023, is expected to impact the volume and quality of Venezuela's crude and fuel sales. The U.S. Treasury has given companies 45 days to wind down pending transactions, particularly crude and fuel sales, through a more restrictive license. The Treasury will process specific authorization requests for business with Venezuela, but entering into new business or new investment previously authorized under license 44 will not be considered wind-down activity. The withdrawal of the license marks a step back from President Joe Biden's policy of re-engagement with President Nicolas Maduro's administration. However, it does not signal a return to the 'maximum pressure' campaign under former President Donald Trump. The license had allowed Venezuela's state company PDVSA to expand exports, improve cash flow, and secure imports of diluents and fuel for the domestic market. Chevron, Repsol, and Eni were not affected by the withdrawal of the license, ensuring Venezuela's oil flows to the United States and Europe. Venezuela's opposition is negotiating to choose its candidate for the July 28 presidential election. PDVSA's oil exports reached 900,000 barrels per day in March, the highest level in four years, but the backlog of tankers waiting to load at Venezuelan ports remains. Without the license, PDVSA may resort to selling its oil under price discounts to Asia through intermediaries, unless enough U.S. individual authorizations are issued. PDVSA's finances, already eroded by five years of sanctions, will also be further limited, affecting access to hard currency for various expenses. [594f5612]

The US Treasury Department has announced that it will reinstate Venezuela sanctions after President Joe Biden's administration determined that Nicolas Maduro's regime failed to honor an agreement to allow a fairer vote in elections scheduled for July. The license that permitted some oil and gas activities will expire, and affected companies will have until May 31 to wind down operations. Chevron Corp. is exempt from the ruling. The US officials said sanctions relief depended on Maduro meeting the terms of the agreement, but he did not fully comply. The decision ends a brief respite for foreign oil executives in Venezuela and threatens to set back Maduro's efforts to restart the country's economy. The lack of investment from Chevron and other outside investors could ultimately see Venezuela's oil output decline. The US officials said the decision to reimpose sanctions should not be viewed as a final judgment on the prospects of competitive elections in the future. The impact on gas prices is uncertain, but officials are aware that the economic situation in Venezuela has contributed to record levels of migration. [afbf5e24]

Jorge Rodríguez, the head of the Venezuelan government delegation, criticized the US announcement of reimposing sanctions. The US had previously granted relief from sanctions on Venezuela's state-run oil, gas, and mining sectors after the government agreed to work with members of the opposition to hold a free and competitive presidential election. However, the government has hindered opposition leaders from registering as candidates for the upcoming election. Rodríguez claimed that the government had never committed to allowing those who violated the constitution and called for violence to participate in the elections. He also criticized the US for not allowing international observation in its own elections. In response to the sanctions, Venezuela's propaganda apparatus launched a campaign to present a positive image of the economy and blame the opposition for the country's social and economic issues. President Maduro highlighted positive economic forecasts and new agreements with the oil company Repsol. The president of the state-owned oil company PDVSA, Pedro Tellechea, called for discussions with other global oil companies to invest in Venezuelan fields. Venezuela's oil production has declined significantly in recent years due to politicization, disinvestment, and international sanctions. [1598d837]

Following the United States’ decision to reimpose restrictive measures on Venezuela's oil sector, President Maduro warns of repercussions for U.S. interests. The revoked license, allowing Venezuela to freely export and invest in its oil sector, will impact its crude and fuel sales and necessitate individual U.S. deal authorizations. Maduro criticized the U.S. administration for fulfilling its 'blackmail threat,' emphasizing Venezuela’s commitment to its chosen path. Despite strides in inflation control, uncertainties loom over future economic stability. The expiration of License 44 represents a setback from Biden’s engagement policy with Maduro. Analysts predict stagnating oil exports and production, impacting Venezuela’s economic recovery trajectory. [0af536bd]

Up to 50 U.S. companies have requested individual licenses to operate in Venezuela's oil industry following the expiration of a general license. The U.S. Treasury will prioritize companies with existing operations. Venezuela remains under U.S. sanctions since 2019. France-based oil producer Maurel & Prom and Spain's Repsol have received individual licenses. The U.S. aims to prioritize companies with existing oil output and assets. The U.S. Mission for Venezuela is reviewing the license requests. The oil sector is important for Venezuela's economy, but the U.S. emphasizes the importance of the election on July 28th. Diplomatic channels with Maduro's government remain open. BP's negotiations with Venezuela on an offshore gas project have been paused since the general license expired. [a1de8bda]

A U.S. court has been asked to postpone a hearing on the winning bid in an auction of shares in the parent company of Citgo Petroleum to September 19. The court officer evaluating bids requested the delay to complete his evaluation and negotiate with bidders. The auction is expected to lead to an ownership change of Venezuela's Citgo Petroleum to satisfy $21.3 billion in claims against the country. The court had planned to finish the sale process on July 15, days before Venezuela's presidential election on July 28. Multiple bids were received in the auction, and additional time is needed to clarify the terms and negotiate a definitive sale agreement. The hearing scheduled for July 2 will provide an update on the evaluation progress. [1214a3c0]

India's Reliance Industries has received approval from the United States to resume importing oil from Venezuela despite Washington's sanctions, according to a source familiar with the matter. The approval allows Reliance to import oil from Venezuela and make payments in a restricted account, which can only be used for purchasing humanitarian goods such as food and medicine. The move comes as India seeks to diversify its oil imports and take advantage of lower prices. Reliance had previously stopped importing oil from Venezuela due to US sanctions. The company is one of the largest buyers of Venezuelan oil and has significant refining capacity. The approval from the US is seen as a positive development for both Reliance and Venezuela, as it allows for continued trade between the two countries. [7b5584a3]