The sudden escalation of the already devastated US-Venezuelan relations will probably lead to consequences that could have a much greater impact on the oil market. Despite the severely limited yield, the Republic remains a major player on the oil market.
On Wednesday, the Trump Administration announced that it would support the Venezuelan National Assembly leader, Juan Guaido, who self-proclaimed a provisional president earlier in the day. Shortly thereafter, Donald Trump recognized him, and President Nicolas Maduro's reply was not delayed. He interrupted his relations with the United States and gave the US diplomats an ultimatum of 72 hours to leave the state.
Since the last turn of events, the US is expected to expand its sanctions on energy trade between the two countries. A move that could potentially be destructive for Venezuela. The country's oil production has shrunk dramatically in recent years, depriving the Socialist Republic of vital revenue and causing a continuing and destructive economic crisis.
However, the consequences would also shift to the wider oil market and complicate relations between OPEC and the US. The Trump administration has already imposed sanctions, but no decision has been made to block the import of crude oil from Venezuela for the time being. Also, for the moment, the export of US-produced thinners that Venezuela is required to process its heavy oil is not blocked. If these sanctions were imposed, it would put a supply of certain types of crude oil under huge strain. However, the low oil price would give Trump the "convenience" to implement the sanctions. Recognition of Guaido is just the beginning. Washington would only take the sanctions to see Maduro react.
If the regime in Venezuela arrests Guuido, Washington will most likely respond to sanctions. This will definitely be a serious blow to Caracas' already ruined.
Another thing to consider is whether Washington will freeze the assets of the current President of Venezuela and whether it would otherwise change the trade relations between the two countries. This would mean purposely supporting Guaido as the legitimate owner of Venezuela's assets, including Citgo's state oil refineries. Subsidiary of the State Energy Company - Petroles de Venezuela.
The consequences for OPEC will also not be delayed. Venezuela holds the presidency of Cartel this year, which means that energy minister Manuel Quevedo will be the current president of OPEC in 2019.
Quevedo is Major General in the Venezuelan National Guard. In 2014, Sen. Marco Rubio, added Quevedo to the list of Venezuelan officials, who must face sanctions for violations of basic human rights and aggressive deterrents to protest rallies. If added to the list, it will be another headache for OPEC in the United States, where the NOPEC law is yet to be established.
T. No Oil Producing and Exporting Cartels Act, or NOPEC, is a bill submitted by Congress seeking to apply anti-trust laws against OPEC to prevent the group from coordinating its production levels for manipulative price influence.
Souurce: CNBC
Photo: Pixabay
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