VENEZUELA

Venezuela congress slams oil deals 

Reuters reports the opposition-run congress issued a resolution calling deals illegal between SOC PDVSA and U.S. and French companies, since they were not sent to lawmakers for approval.

The congress said the oilfield deals with France’s Maurel & Prom and U.S. company Erepla violated article 150 of the constitution of the OPEC FOUNDER which requires contracts signed between the state and foreign companies to be approved by the National Assembly. “They are giving concessions that violate the law,” said Jorge Millan.

Shorn of its power since the opposition won control in 2016, Congress is unlikely to be able to block the two deals but the rejection could create legal complications under a future government.

Maduro was inaugurated for his second consecutive term following a May vote considered a sham by the domestic opposition and many foreign governments. A regional bloc of Latin American countries advised Maduro, a protege of the late Hugo Chavez, not to take office. The deals are part of his effort to reverse a sharp decline in crude output that crippled the economy.

EREPLA

EREPLA SAID IT WOULD INVEST UP TO $500 MILLION IN THREE FIELDS, WHILE MAUREL & PROM SAID IT WOULD INVEST UP TO $400 MILLION FOR A 40 PERCENT STAKE IN AN OILFIELD JOINT VENTURE.

Erepla, registered in Delaware in November and part-owned by a Florida Republican donor and shipping magnate, said Venezuela’s hydrocarbons law “allows PDVSA to contract with companies like Erepla to execute field services without any additional approvals required.”
Referring to the Erepla deal during a congressional session , Millan said that while PDVSA referred to the agreement as an oilfield service contract, “the company will be conducting oil exploration and production activities.”

Maurel & Prom Chief Executive Michel Hochard said the company would act “in accordance with the instructions given” by Maduro and Oil Minister Manuel Quevedo, according to a statement attributed to him in a PDVSA press release.

MADURO: Fraud and Six Years of Failures

January 10 is both the start of Nicolás Maduro’s second term in office as well as a day to reinforce the lack of democratic conditions that led to his declaring victory and what is at stake. Today, one day earlier, the Adrienne Arsht Latin America Center releases a new infographic that depicts the illegitimacy of this new term, Maduro’s first-term results, and options for the road ahead.

Although the 2018 electoral event was not recognized by the international community, Maduro has been unwavering in his quest for power. His authoritarianism and the schemes enriching high-level government officials and members of the military persist despite a ramp-up of international sanctions and growing internal and external pressure.

Now is the moment to double-down on the urgent need for a return to democracy. A continuation–or a deterioration–of the conditions in Venezuela will yield even greater domestic and international consequences, with implications for regional stability.

With Maduro set to begin a second term, this day calls for a reminder of what January 10 really marks:

• A new mandate illegally won
• Six years of an accelerated downward spiral
• A moment for renewed international attention toward Venezuela

See:  New Venezuela Infographic from the Atlantic Council

USA Bars PDVSA Deals from US Financial System

The Trump administration is ratcheting up pressure on Nicolas Maduro to step aside and allow an opposition leader to take his place.

(Bloomberg) — Venezuela’s state oil company and its customers will be blocked from using the U.S. financial system by late April, as the Trump administration ratchets up the pressure on President Maduro to step aside and allow an opposition leader to take his place.

The U.S. announced it would effectively prohibit imports of Venezuelan crude and bar companies from selling cargoes of light oil to the country, which are needed to keep its pipelines flowing. The latest measures on the U.S. Treasury’s website suggest the sanctions could have an even wider impact on the petroleum exports that constitute the nation’s economic lifeline. Any transactions with Petroleos de Venezuela SA, or any entity in which it has a controlling stake, involving U.S. citizens or passing through the country’s financial system must be wound down by April 28, the Treasury said. Americans who work for non-U.S. companies must stop doing any business with PDVSA by March 29.

“Thinking about oil as being a dollar-denominated business, if U.S. banks are jittery and concerned about what they can do, that will cause them to decline all transactions,” said Holman Fenwick Willan. “What is happening is that if you’re a non-U.S. entity you’ll be restricted as to what you can do with PDVSA, if that involves a U.S. person or nexus.”

The U.S. government’s decision to impose sweeping sanctions on Venezuela’s SOC already look like a de facto oil embargo on the country. The administration of President Trump made clear it believes Maduro’s re-election was illegitimate and is applying intense economic pressure after recognizing opposition leader Juan Guaido as interim president. John Bolton, national security adviser, tweeted that “bankers, brokers, traders, facilitators, and other businesses” should not deal in any Venezuelan commodities that he alleged were being stolen by the “Maduro mafia.”

Some European oil traders had temporarily stopped dealing with PDVSA while their lawyers weighed whether it’s possible for non-U.S. entities to continue buying Venezuelan crude without falling foul of American sanctions.

Venezuela pumped 1.2 million barrels a day of crude in December, a decline of almost 50 percent in four years, according to data compiled by Bloomberg. About 500,000 barrels a day of that output was exported to the U.S., but could potentially be diverted to other markets, if buyers are able to find ways to avoid using the American financial system. Some tankers have already turned away from Venezuela without loading crude. Disruption could reach as much as 1 million barrels a day, Citigroup analysts report . “The combination of ongoing domestic protests, global political pressure, and concerted economic pressure via sanctions could hasten a transition as well as lift oil prices.”

Former judge flees to US, denounces Maduro

The defection comes as international and domestic pressure is mounting on Nicolas Maduro ahead of his second presidential term. The former top judge said a controversial May election was not free or fair.

The high-ranking defection comes a day after Venezuela’s opposition-controlled National Assembly called Maduro’s election in a vote last May illegitimate and declared its intention to create a transitional body to prepare for democratic elections.

A dozen Latin American countries and Canada declared they would not recognize Maduroas president if he stays in office and called on him to hand power to the National Assembly.

Sham election

In an interview in Florida, Zerpa said the May election “was not free and competitive.”

He said he did not criticize the election at the time because he wanted to ensure the safe exit of his family from Venezuela, which has been plunged into economic and social misery under Maduro.

“I’ve decided to leave Venezuela to disavow the government of Nicolas Maduro,” Zerpa said .

Supreme Court ‘an appendage’ of presidential palace

The Supreme Court confirmed that Zerpa had fled and that it had opened an investigation into the judge over alleged sexual harassment of women in his office. It said the investigation was started in November 2018 but had only been made public now that he had defected.

The National Assembly was stripped of its powers in 2016 by the Supreme Court, which is dominated by Maduro loyalists, and replaced by a separate, regime-created Constituent Assembly.
Zerpa, a longtime Socialist ally, wrote the ruling that provided the legal justification to strip the National Assembly of its powers after the opposition gained control of the body from the Socialists.   In the interview, Zerpa described the Supreme Court as “an appendage of the executive branch,” and claimed justices often received instructions from the presidential palace.

The May election called by the Constituent Assembly was boycotted by most of the main opposition groups, many of whose members have been jailed or driven into exile.

cw/cmk (AFP, EFE, Reuters)

3 million people have fled Venezuela, says UNHCR
People continue to leave the troubled Latin-American country as the economic situation turns increasingly sour. Food shortages have become a part of everyday life. (08.11.2018)

How Venezuela gets plundered
A money laundering scandal involving Venezuela’s state oil company PDVSA could turn into a problem for a Swiss bank. A German banker recently affiliated with the lender has been arrested in Miami. (06.08.2018)

 Lima Group refuse to recognize Maduro mandate
Latin American governments have urged Venezuela’s president, Nicolas Maduro, not to take the oath of office. The Lima bloc have said they will not recognize his new term because last year’s election was “illegitimate.” (04.01.2019)

Venezuela congress names new leader, calls Nicolas Maduro illegitimate
The new leader of Venezuela’s opposition-controlled National Assembly has called Nicolas Maduro a dictator whose legitimacy has run out. Juan Guaido also said congress aimed to restore constitutional order. (06.01.2019)

Maduro begins second term as crisis deepens

Jan. 10, 2019 5:06 AM ET
Venezuela’s Nicolas Maduro was sworn in for a second term as president amid a collapsing economy that shows no sign of bottoming out.

“Prices will go up again. He’ll most likely raise the minimum wage, but that means the prices on everything go up also. So we’ll be stuck in the same situation,” according to Fitch director Richard Francis.

In fact, the IMF predicts inflation will hit 10 million percent in 2019.

TT sends Moses to  Maduro’s inauguration
Amid international condemnation

While most of the world refuses to acknowledge the legitimacy of a Maduro-led regime, the Foreign and Caricom Affairs Minister attended the President’s second inauguration as an official representative of the TT government.

Moses was among international delegates from Russia, China, Cuba, Syria, Iraq and Turkey and Caribbean nations, St Kitts and Nevis, St Vincent and the Grenadines and Antigua and Barbuda. Conspicuously absent were the US, the UK, the European Union and several of Venezuela’s South American neighbours.

The minister left early to attend the inauguration. The public, however, was not informed. Instead, journalists and activists watching the broadcast on Venezuela’s state television, Telesur, noticed Moses among the audience. Maduro, in his inaugural speech, even mentioned TT among others.

Asked about the decision to have the country represented at the swearing-in of the controversial administration, Communications Minister Stuart Young defended the government, saying it had long been TT’s policy to recognise the legitimacy of Maduro’s regime.

“We are a sovereign nation. The minister going to represent TT at the inauguration today speaks for itself. We have consistently said as an administration that we recognise the government of Venezuela and we stand as a neighbour ready to assist in any way we can,” Young told reporters , adding that this country continued to have good relations with Venezuela.

Maduro won Venezuela’s presidential election last May with 67 per cent of the vote, although voter turnout was less than half those registered. Election watchdog groups in Venezuela and abroad suggested evidence of fraud during the electoral process and the majority Opposition refused to participate, all but guaranteeing Maduro’s party, the United Socialist Party of Venezuela, the win.

The UN Human Rights Commission said the vote “does not in any way fulfill minimal conditions for free and credible elections.” Most western countries do not recognise the legitimacy of government, nor does Venezuela’s legislature, the National Assembly, which is made up primarily of Maduro’s political opponents. In a special meeting , the Permanent Council of the Organisation of American States (OAS) voted “to not recognise the legitimacy of Nicolas Maduro’s new term.” US Secretary of State, Mike Pompeo, said, “The US condemns Maduro’s illegitimate usurpation of power today … the US remains steadfast in its support of the Venezuelan people and will continue to use the full weight of US economic and diplomatic power to press for the restoration of Venezuelan democracy.”

Young said that the US was one of TT’s good friends and allies and understood that TT was a sovereign nation.

Venezuela was TT’s closest neighbour and what happens there directly affects this country. “We are very careful. We have commercial arrangements with Venezuela and …with the US. .. we have great relations with both countries.”

Last August, TT and Venezuela signed the Dragon Gas deal, bringing Venezuelan gas for the first time to Trinidad, which refuses to acknowledge the economic crisis in Venezuela, although as a result, an increasing number of refugees and economic migrants seeking to escape hardship, starvation, unemployment and hyperinflation have been fleeing to TT, often entering illegally.

Exxon ships have not returned to incident site

Seismic survey vessels hired to explore for oil offshore Guyana by Exxon Mobil have not returned to the site of confrontation with Venezuela’s navy on December 22 2018, which both countries claim to be within their territorial waters. Other oil companies, including Spain’s Repsol are active offshore Guyana and Chevron applied for a government license.

Venezuela to map Caribbean as tension grows

Bloomberg reports Venezuela will remap its Caribbean oil and gas prospects in the coming months.

The seismic survey will include an eastern area of Venezuela bordering Guyana. It may further stoke a century-long border dispute which Venezuela reignited after intercepting two ships conducting seismic studies for Exxon as the oil major prepares to develop giant deep-water reserves off the coast of Guyana.

Venezuela previously mapped its offshore territory for oil deposits but some areas remain uncharted. The new survey will include areas bordering Caribbean islands such as Grenada and Saint Vincent and may collide with Exxon Mobil’s venture in the region. Following the encounter with the Venezuelan navy, one of the two ships hired by Exxon will conduct seismic surveys in Guyanese waters away from the border.

“More surveys are pending to identify commercially viable options for gas,” said Antero Alvarado,of Gas Energy Latin America. “Past PDVSA studies ignored identifying gas deposits because the focus was always on oil.’’

Guyana, which has U.S. backing for its ownership claim over the waters, said Venezuela broke international law.

President Nicolas Maduro said the territory belongs to his country and vowed to defend it “at any cost.” Maduro issued a decree a week after the interception stating Venezuela’s continental shelf is open for oil exploration, although no investment plans have been announced for the area yet. PDVSA’s offshore division produces mainly gas from the western coast in partnership with Italy’s ENI SpA. It has l inactive oil and gas projects in the east, near Trinidad and Tobago and Guyana. Three of them are in partnerships with Norway’s Equinor ASA, Chevron Corp. and France’s Total SA.

U.S. weighs next sanctions…

As the U.S. evaluated whether to impose tougher sanctions against Venezuela’s military and vital oil industry, to ratchet up pressure on newly inaugurated president Nicolas Maduro, he boosted the minimum wage 300% to 18,000 bolivares [around $6.52] amid the country’s relentless battle against hyperinflation. In 2018, the minimum wage was raised five times.

Sanctions prompt Maduro to talk with Trump

“The U.S. has decided to follow the path of stealing Citgo from Venezuela,” President Maduro declared after the Trump administration imposed sanctions on its parent company – state-owned oil giant PDVSA. Some licenses will be granted to continue work with PDVSA and Citgo, but those revenues will be held in a blocked account. Seeking to alleviate the situation, Maduro offered to meet with President Trump for talks, according to his foreign minister Jorge Arreaza.

Venezuela’s Potential Impact

Opposition leader Juan Guaidó swore himself in as president and was immediately recognized by the U.S. and most Latin American countries as President Maduro showed no sign of stepping aside. A stalemate could result in U.S. sanctions against Venezuela that will deprive Gulf Coast refineries of affordable heavy crude.

The long-term scenario may be brighter, with a stable government led by Guaidó enjoying friendly relations throughout the hemisphere and the likelihood of restoring much of the 67% of oil production lost since Hugo Chávez took power in 1999. That could lead to lucrative opportunities for U.S.companies to assist in rebuilding Venezuela’s energy infrastructure.

Trump sanctions PDVSA

President Donald Trump sanctioned Venezuela’s SOC PDVSA and its central bank , the latest U.S. move intended to raise pressure on the regime of President Nicolas Maduro.
National Security Adviser John Bolton urged Venezuela’s military to accept a peaceful transfer of power to leader of the National Assembly, Juan Guaido, whom the U.S. recognized as the OPEC founder’s interim president. Bolton said that the action will block $7 billion in Venezuelan assets and reduce the country’s exports by $11 billion over the next year.

“The U.S. is holding accountable those responsible for Venezuela’s tragic decline,” Treasury Secretary Steven Mnuchin said.

Citgo Petroleum, a Houston-based unit of PDVSA, will continue to operate but will be unable to remit money to the Maduro regime. Its proceeds must instead be held in blocked U.S. accounts. Guaido said he would take control of Venezuelan accounts abroad and would name new boards of directors for PDVSA and Citgo.

The Treasury secretary added that in the “short term” he expects “modest” impact on U.S. refineries. The sanctions would not affect oil already purchased that is being shipped and he did not expect U.S. gas prices to rise.

West Texas Intermediate crude futures were little changed at $52.16/bbl after the announcement, after settling $1.70 lower on the day.

Trump assailed Maduro in a letter to Congress explaining his executive order implementing the sanctions, saying that the action would support Guaido, endorsed last week by the U.S. and other nations as the rightful president. He accused Maduro’s regime of “human rights violations and abuses in response to anti-Maduro protests, arbitrary arrest and detention of anti‑Maduro protesters, curtailment of press freedom, harassment of political opponents, and continued attempts to undermine” Guaido’s government-in-waiting. All PDVSA assets and property subject to U.S. jurisdiction are blocked, according to a Treasury statemen. U.S. citizens and companies are generally prohibited from doing business with the Venezuelan firm. The move is consistent with the US administration’s efforts to starve Maduro of oil money, while blunting the potential impact on U.S. refiners and U.S. motorists, using “a scalpel, rather than a meat axe.”ss

Florida Senator Marco Rubio who represents a large Venezuela expatriate community, praised the sanctions before they were announced. “The Maduro crime family has used PDVSA to buy and keep the support of many military leaders. The oil belongs to the Venezuelan people, and therefore the money PDVSA earns from its export will now be returned to the people through their legitimate constitutional government.” The Republican is a vocal opponent of the Maduro regime, which the U.S. declared illegitimate .The sanctions are the latest move in Trump’s campaign to oust the leftist regime of Maduro, who succeeded the late President Chavez in 2013. The U.S. recognized opposition leader Juan Guaido as the rightful head of state as protests against the Maduro regime expanded.

Since the US administration announced financial sanctions in August 2017. PDVSA has been moving away from dollar-denominated transactions. The company requires payment in euros for oil sold to clients in the U.S., Europe and Asia and buys gasoline and diesel for payment in euros.

PDVSA also buys fuels via Citgo, owner of three refineries in the U.S, mostly in barter deals. PDVSA gets the fuels and pays the suppliers — including trading house Vitol SA and Reliance Industries Ltd of India — in Venezuelan crude.

Guaido, a 35-year-old engineer-turned-lawmaker and Maduro are locked in a struggle for support in the streets, the military and the mainstay oil industry. Guaido has been unable to sway the armed forces to his side but tapped deep public discontent with an economy beset by hyperinflation spiraling at an annual rate of about 225,000% and vast shortages of food and medicine.

U.S. officials successfully lobbied the the Bank of England to deny Maduro access to $1.2 billion worth of gold the government holds in London, stymieing the regime’s efforts to pull in cash from abroad. The UK, along with Canada and most Latin American countries, followed the U.S. in recognizing Guaido as the country’s legitimate leader.

DILUTING  HEAVY CRUDE BECOMES HARDER

Venezuela produces some of the thickest crude on earth which cannot be exported without first being diluted. That becomes a tougher task following the latest U.S. sanctions.

Output has been diluted for years with heavy naphtha from the U.S., thinning the crude for it to be piped to export terminals and onto tankers. With American exporters now barred from supplying the diluent, the question is whether sellers are willing to cover the shortfall. Venezuela is seeking naphtha supplies from Europe to meet the diluent demand but it will be difficult and more expensive, as the only way that they will be able to ship the crude over to Asia.

The Trump administration dealt its toughest blow yet to the authoritarian Nicolas Maduro, issuing new sanctions on PDVSA that effectively block his regime from exporting crude to the U.S.

Worst Case

The measures will also make the country’s imports harder. European trading houses and oil companies will struggle to supply Venezuela with naphtha as sanctions will scare banks, shipping companies and insurers from dealing with PDVSA. They cannot use the U.S. financial system to route payments, forcing them to use other currencies. In the past, traders and oil companies have taken a “worst case” scenario when interpreting U.S. sanctions, erring on the side of caution.

Why  oil output could take a long time to recover.

Europe’s naphtha market needs a new source of demand. The petroleum product is trading at about $8.70/bbl below Brent crude in Europe, the weakest for the time of year since at least 2007. Venezuela imported almost 90,000 bpd of heavy naphtha for crude oil blending last year with U.S. exporters dominating the trade. Those flows reached 113,000 bpd as recently as December.

Russia, still allied to the regime of Maduro, will ship more to the Latin American country, although the freight costs would be much higher. The question is whether and how Venezuela could pay for the supplies. A more expensive option is to use the light oil from Algeria as diluent, which Venezuela has done previously..

Traders are split on how much naphtha from Europe could be sold to Venezuela in practice. Several European countries recognized the National Assembly leader Juan Guaido as the ruler, complicating shipments. Some traders say more European naphtha could flow to Brazil, which in turn would supply Venezuela but Brazil’s government disapproves of Maduro’s regime, suggesting such shipments are not straightforward.

How one of the last oil buyers may react to sanctions

Bloomberg-

After the U.S. slapped sanctions on PDVSA, which essentially add up to an oil ban, the market has focused on how the remaining buyers of the country’s heavy, low-quality crude will react.

India is the third-biggest buyer of Venezuelan oil, after the U.S. and China, averaging about 340,000 bpd last year. Indian private refiners — Reliance Industries Ltd. and Nayara Energy Ltd. (formerly Essar Oil Ltd.) — are the primary buyers because their advanced refining systems can process the thick Venezuelan grade into high-value fuels such as low-sulfur gasoline and jet fuel. In contrast, state-owned refiners generally won’t benefit from more Venezuelan crude as their facilities can’t handle the low quality.

Nayara Energy

The U.S. sanctions may provide Nayara Energy with an opportunity to get extra Venezuelan crude as more of it becomes available in the market, which will help make up for supply it lost as the South American nation’s exports slumped. India’s purchases from Venezuela fell about 11% last year, in line with an overall slump in exports.

The company was yet to receive offers for more oil from Venezuela and it was still trying to understand the impact of the sanctions on shipping and payment mechanisms. Overall, it’s too early to determine how much more Venezuelan oil may come to India. Nayara bought about 70,000 bpd of Venezuela’s oil in 2018, according to tanker tracking data.

Reliance Industries

At 1.36 MMbpd of capacity, Reliance Industries is the biggest private refiner in India and the country’s top buyer of Venezuelan crude, at about 270,000 bpd, or roughly 80% of the total.

“Both Reliance and Nayara have a big appetite for Venezuelan crudes given their heavy crude slate.” said Senthil Kumar, at energy consultant FGE. “They cut imports recently due to declining production in Venezuela and Mexico. This is good opportunity to take some volumes that are redirected from U.S., but upside is limited.”

Indian Oil

Of state-owned refiners, Indian Oil Corp. is the nation’s biggest at 1.6 MMbpd of capacity but that doesn’t mean it and others will be able to make room for more Venezuelan oil. That’s because the oil will need to be blended with lighter crude to run in most units owned by government refiners, according to company policy.The sanctions could also divert some of Indian Oil’s traditional supplies into the U.S. to fill the shortfall from Venezuela, leaving the company in a position to pay higher costs to compete for feedstock.

Bharat Petroleum Corp.

“Greater availability of Venezuelan oil doesn’t necessarily mean supply reliability,” said R. Ramachandran, refineries director at the state run company known as BPCL. “There are other issues such quality of the crude and higher freight. All these put together, Venezuelan oil isn’t very attractive to India, especially the state refiners. There is only a limited amount crude of Venezuela’s quality that Indian refinery can process. That way, the Indian state refiners do not benefit much from greater availability of Venezuelan oil freed by the U.S.”

And the government?

Prime Minister Narendra Modi generally avoids taking contentious stands on active geopolitical developments, particularly when it comes to the internal politics of trading partners. Venezuela is its fourth-biggest crude supplier, behind Iraq, Saudi Arabia and Iran.

Asked for a comment after the U.S. imposed sanctions, the foreign ministry referred to a statement from spokesman Raveesh Kumar:

“It is for the people of Venezuela to find a political solution to resolve their differences.”

MADURO ACCUSES U.S. OF TRYING TO ‘GET HANDS ON OUR OIL’

Embattled president warns Donald Trump he risks turning country into new Vietnam

Venezuela’s president, Nicolás Maduro, accused Donald Trump and a “group of extremists around him” of plotting to topple him in order to seize Venezuela’s oil, and warned he risked transforming the South American country into a new Vietnam.

As Venezuela prepared for a day of fresh pro-opposition protests – Maduro claimed the leaders of the US “empire” were conspiring “to get their hands on our oil – just like they did in Iraq and in Libya”.

Unable to accuse Venezuela’s government of stockpiling weapons of mass destruction, they were instead waging a media campaign of fake news to justify intervening in a country that boasts the world’s biggest crude reserves.

“We will not allow a Vietnam in Latin America. If the US intends to intervene against us they will get a Vietnam worse than they could have imagined. We do not allow violence. We are a peaceful people,” Venezuela’s embattled leftist leader added.    “I ask that Venezuela be respected and I ask for the support of the people of the US so there isn’t a new Vietnam, least of all here in our America.”

Maduro painted himself as an “admirer” of the US who had visited Boston, Philadelphia, Baltimore, New York and Washington and wanted closer relations with the White House.

“The United States is so much bigger than Donald Trump, so much bigger,” he said.

But Maduro looks unlikely to repair relations with the Trump administration, which has thrown its full weight behind his rival to the presidency, Juan Guaidó.

Trump reaffirmed his support for Guaidó, and the two men agreed to stay in regular contact. Trump stepped up his battle against Maduro by announcing sweeping sanctions against the SOC PDVSA.

Maduro said he was willing to negotiate with Guaidó. “I’m willing to sit down for talks with the opposition so that we could talk for the sake of Venezuela’s peace and its future.” Talks could be held with the mediation of other countries, naming Mexico, Uruguay, Bolivia, the Vatican and Russia. Moscow repeated its offer to mediate. The Russian foreign minister, Sergei Lavrov, said Russia could offer more balanced conditions for dialogue than the west.

 

 

 

What next?  The four most likely outcomes

“We welcome the Venezuelan president’s willingness to accept such international [mediation] efforts,” he said in Moscow. “We call on the opposition to display an equally constructive approach, retract the ultimatums, and act independently, guided above all by the Venezuelan people’s interests.”

Moscow offered full-throated support for the Venezuelan leader. Russia has invested an estimated $17bn (£13bn) in Venezuela by refinancing the country’s debt, as well as through oil and arms deals.

Guaidó, a 35-year-old former student leader and head of Venezuela’s national assembly, has been in the forefront of a renewed attempt to force Maduro from power since he declared himself Venezuela’s rightful interim president in a daring challenge to the incumbent. Venezuela’s supreme court imposed a travel ban and financial restrictions on Guaidó, including freezing his bank accounts.

At the start of a two-hour protest students gathered outside the gates of the Central University of Venezuela in Caracas. Professors gave civics lectures to the assembled students, while riot police who almost matched their numbers, watched .

A student activist whose brother was imprisoned after taking part in street protests in 2017, said: “This is the moment to fight for democracy. We do not seek confrontation, but rather that the police and military join this struggle. This is not a fight between Chavistas and the opposition; this is a fight for Venezuela.”

More protests are planned .

Additional reporting by Patricia Torres in Caracas

Unrest shoves aside U.S. supply surge as oil climbs

By ALEX NUSSBAUM on 1/24/2019

 Oil climbed as growing instability in Venezuela outweighed fresh reminders of the American shale boom.

Futures in New York rose slightly on Thursday as Venezuelan President Nicolas Maduro defied calls from the U.S. and other nations to cede control of the Latin American country that holds the world’s biggest crude reserves. The fortress-like U.S. embassy on a Caracas hilltop may become a flashpoint after Maduro’s order for American diplomats to evacuate was ignored.

A U.S. Energy Department report that showed the biggest increase in domestic crude stockpiles since November and record gasoline inventories was largely shrugged off by investors.

“It’s a function of people keeping an eye on supply concerns out of Venezuela,” said Marshall Steeves, energy markets analyst at Informa Economics IG in New York. “That’s the overriding issue today.”

Crude markets had been off to their best start in 18 years on optimism about output cuts by Saudi Arabia, Russia and other top producers. That mood faltered in recent days as data showed rising production in the U.S. and weaker economic growth around the globe.

U.S. President Donald Trump was said to be considering new sanctions against Venezuela as Maduro faces one of the toughest challenges to his reign. Separately, commodity traders Mercuria Energy Group Ltd. and Glencore Plc said OPEC supply cuts had set the stage for rising prices.

Bullish sentiment could reign again if Trump follows through on a threat to expand sanctions against OPEC member Venezuela, forcing some Gulf Coast refiners to seek out new supplies. The administration added to pressure on Maduro’s regime on Wednesday by recognizing opposition leader Juan Guaido as the country’s interim president.

“With the U.S. now clearly taking sides with the opposition, changes might be in the making,” said Tamas Varga, an analyst at PVM Oil Associates Ltd. in London. “This would deal a further blow to U.S. refiners that rely on whatever Venezuelan oil is still available and as such would be short-term bullish.”

West Texas Intermediate crude for March delivery added 51 cents to close at $53.13/bbl on the New York Mercantile Exchange. International benchmark Brent crude, which is less affected by Venezuela than the U.S. grade, slipped 5 cents to $61.09 on the London-based ICE Futures Europe exchange and commanded a $7.96 premium to WTI.

U.S. ban may offer China and India feast of cheap  oil

By SERENE CHEONG AND SHARON CHO on 1/24/2019

SINGAPORE (Bloomberg) — A possible move by Donald Trump to hurt Venezuela’s oil industry could prove a shot in the arm for the Xi Jinping and Narendra Modi administrations.

If the U.S. decides to deploy a slate of sanctions that it’s said to have drafted against the Latin American nation, American refiners — the No. 1 consumer of Venezuelan crude exports — would be forced to cease purchases. That may mean more supply becomes available for the OPEC producer’s other big customers: China and India.

The opportunity to soak up the extra supplies from Venezuela at potentially cheap prices would be a boon for the Asian countries, where the governments are trying to support slowing economic growth. In China, Xi’s administration is trying to implement stimulus measures to shield the public from the effects of its ongoing trade war with the U.S. Meanwhile, Modi’s party is being weighed down by populist pressures before national elections due by May.

Meanwhile, Venezuela will likely be eager to hold on to them as customers, especially after years of economic turmoil has battered the nation’s production and left it with few other buyers in the growing Asian oil market. Other major crude buyers such as South Korea and Japan have largely stopped purchases from the Latin American country, and even China and India have reduced imports.

“The quality of Venezuelan oil has been deteriorating after years of under-investment and aging infrastructure,” said Virendra Chauhan, an analyst at industry consultant Energy Aspects Ltd. “That’s making the country’s crude more difficult for refineries to run, reducing its customer pool. This means it’ll be tough for Venezuela to sell more oil to new markets and customers outside of traditionally active buyers in China and India.”

China imported about 340,000 bpd of crude from Venezuela in the first 11 months of 2018, accounting for 3.7% of total shipments from overseas, government data show. The Asian nation had bought about 437,000 bpd, or about 5.2% of its foreign oil, from the Latin American country in 2017.

Venezuela was the fourth-biggest crude supplier to India — after Iraq, Saudi Arabia and Iran — in 2018, when it received about 330,000 bpd, 13.6% lower than a year earlier, according to the Directorate General of Commercial Intelligence and Statistics, an arm of the ministry of commerce and industries. The supplies accounted for about 8% of total imports. Reliance Industries Ltd. and Nayara Energy Ltd. are the country’s only buyers of Venezuelan cargoes.

Sanctions uncertainty

One point of uncertainty is whether the potential U.S. action will be similar to measures against Iran that has forced nations across the globe to limit purchases from the Persian Gulf state. Currently, traders in the crude market assume that only American refiners will be required to halt Venezuelan purchases if sanctions are imposed. It’s unclear if the Trump administration plans more expansive restrictions.

Any disruption in Venezuelan supplies is also likely to increase demand for heavy-sour crudes — the dense, viscous and relatively more sulfurous varieties that the Latin American nation produces.

This could raise competition for similar supplies pumped in the Gulf of Mexico such as Mars, which are not as dense and sulfurous as Venezuelan supplies but is closer in chemical characteristics than U.S. shale oil. It could also draw more Middle East cargoes toward America. Mars oil’s premium to benchmark West Texas Intermediate crude jumped to $7/bbl on Wednesday, the highest level in five years.

U.S. refiners “will need to hustle to secure alternate foreign crude oil supplies to replace short-haul Venezuelan heavy sour with Mexico and the Middle East such as Iraq and Saudi Arabia being the most logical replacements,” said John Driscoll, the chief strategist at JTD Energy Services Pte Ltd.

“Forcing Venezuela into the spot market to dump prompt crude puts them in a corner. Buyers including those in Asia will assume credit and performance risks buying from Venezuela,” he said.

OIL PUSHES HIGHER AS VENEZUELAN CRISIS THREATENS CRUDE FLOWS

By ALEX NUSSBAUM AND GRANT SMITH on 1/25/2019

NEW YORK and LONDON (Bloomberg) — Oil prices moved higher as analysts predicted the mounting political crisis in Venezuela could take a chunk out of global crude flows.

Futures rose as much as 1.5% in New York. Venezuela, owner of the world’s biggest oil reserves, could see crude production drop by a third this year, analysts at Fitch Solutions said Friday. The United Nations Security Council, meanwhile, scheduled a meeting in New York on the turmoil, as the U.S. ordered many of its diplomatic personnel out of the country and considered sanctions on its oil exports.

Tensions flared anew this week as National Assembly leader Juan Guaido moved to oust strongman President Nicolas Maduro, with the backing of the U.S. and other countries. Any slowdown in Venezuela would come atop supply cuts orchestrated by OPEC and Russia this year to boost crude prices.

“There’s an upward bias here, considering there’s supply-side outages and potential ones lurking,” Michael Tran, an RBC Capital Markets LLC commodity strategist, said by telephone. “The market could be tighter than what people previously anticipated.”

Prices also climbed on hopeful economic news. Equity markets rallied around the globe on encouraging earnings reports and word that the U.S. Federal Reserve was considering an early halt of efforts to reduce its balance sheet.

Crude had already posted a strong start to the year before the Venezuela flare-up, as the Organization of Petroleum Exporting Countries and its allies cut output. Prices have risen around 25% from a late December low. But the rally has slowed on fears of weakening global growth, exacerbated by the U.S.-China trade fight and America’s government shutdown. Despite Friday’s gains, oil and equities remained on track for their first losing week of the year.

West Texas Intermediate crude for March delivery gained 51 cents, or 1%, to $53.64/bbl on the New York Mercantile Exchange as of 12:25 p.m.

Brent for March settlement advanced 46 cents to $61.55/bbl on the London-based ICE Futures Europe exchange, and traded at a $7.89 premium to WTI. The global benchmark crude has dropped 1.9% so far this week.

While the U.S. shale boom has shown some signs of slowing, American supplies are still abundant. U.S. crude stockpiles rose the most since November last week and gasoline inventories climbed to a record, government data showed on Thursday.

Venezuela risk

A major disruption in Venezuela could be a game-changer.

The OPEC member has already seen its output drop 50% in five years as a spiraling economic crisis takes its toll on the oil industry. Even without new U.S. sanctions, Venezuela’s production — currently about 1.2 MMbpd — may lose a further 300,000 to 500,000 bpd, RBC Capital Markets estimates.

Internal conflict could result in a much bigger and longer-lasting disruption. Even if Maduro’s government is replaced, “the road back for Venezuela will be extremely arduous given the depths of the economic and humanitarian crisis,” Tran and fellow RBC analyst Helima Croft wrote in a note.

US’S BOLTON APPEARS TO THREATEN  WITH: ‘5,000 TROOPS TO COLOMBIA’

US National Security Advisor John Bolton has stirred speculation after observers noticed “5,000 troops to Colombia” scrawled on his notepad. Accidental or not, it sends a signal to Venezuela’s leadership.

The United States appeared to issue a veiled military threat to Venezuela when National Security Advisor John Bolton was seen at a press briefing announcing sanctions on Venezuela’s state-owned oil company while holding a yellow notepad carrying the line “5,000 troops to Colombia.”

There was no mention at the press briefing on Monday of sending troops to Colombia. The Andean country shares a 1,370-mile (2,200-kilometer) border with Venezuela.

The White House has said “all options” are on the table to restore democracy to Venezuela and apply pressure on its ruler, President Nicolas Maduro.

Read more: Venezuela and the US: From friends to foes 

It was not until after the briefing that observers noticed the writing on the notepad, on which was also scribbled, “Afghanistan — welcome the talks,” a reference to reported progress in negotiations with the Taliban.

It’s hard to imagine Bolton, a longtime diplomat, would unwittingly reveal his notes in front of White House press photographers

Colombia refutes troop talk

Colombia’s foreign minister said late Monday he had no idea why Bolton, an ultra-security hawk who beat the war drums against Iraq and has advocated attacking Iran, had scribbled a note about a US troop deployment.

“Regarding the mention of Colombia in the notebook that Mr. John Bolton had in his hands, the scope and the reason for the annotation is unknown,” Foreign Minister Carlos Holmes said in Bogota.

Colombia will “act politically and diplomatically” to promote an electoral process and restoration of democracy in Venezuela, Holmes said.

In the coming days General Mark Stammer, Commander of the US Southern Command, will visit the Colombian capital, El Tiempo newspaper reported. According to Colombia’s Ministry of Defense, it will be a normal meeting between the two countries to discuss the fight against drug trafficking, organized crime and regional security.

There are already several hundred US military personnel in Colombia as part of Plan/ Peace Colombia, a US-funded aid, security and anti-drug operation established in 2000.

Read more: Venezuela: Who will the military support? 

Is Bolton posturing?

Whether accidentally or not, Bolton’s scribbling ratchets up pressure on Maduro and the military leadership that has so far continued to back him.

Two dozen countries have backed Venezuelan National Assembly leader Juan Guaido, who declared himself Venezuela’s interim president last week. The opposition, US and most regional states contend Maduro’s re-election last May was not legitimate.

Read more: Venezuela explained: Who backs Maduro, who backs Guaido? 

Protests in Venezuela
VENEZUELA ON THE BRINK

Maduro has branded US moves against him a “coup” and the two countries severed formal diplomatic relations last week, triggering tensions over the continued US Embassy presence.

The Maduro government had ordered all US diplomats to leave Venezuela, although it later partially backtracked to allow further talks.

US Secretary of State Mike Pompeo has ordered out most staff from the US Embassy in Caracas, but the diplomatic post remains in operation.

Sending signals

Bolton’s notepad strategy may be to send a signal to Maduro’s government that the US military would respond if its diplomats were forcibly evicted or there were clashes with Marines stationed at US diplomatic posts.

It may also be meant to signal to Maduro, and more importantly wavering officers in the mililtary, that the US would be prepared to intervene in the event of a bloody crackdown on the opposition.

Bolton used the press briefing to again call on security forces “to accept the peaceful, democratic and constitutional transfer of power.”

On Tuesday, Russian Foreign Minister Sergei Lavrov was quoted as saying the US sanctions imposed on Venezuela’s state oil company were illegal and amounted to an attempt to confiscate Venezuelan state assets. Russia would take all necessary steps to support Maduro’s administration, he said.