Trump plans U.S. control of Venezuelan oil for years to come, targeting $50/bbl - WSJ
By: Carl Surran, SA News Editor
The Trump administration is planning a sweeping initiative to dominate Venezuela's oil industry for years to come, and President Trump has told aides he believes his efforts could help lower oil prices to $50/bbl, The Wall Street Journal reported.
A plan reportedly under consideration includes the U.S. exerting some control over Venezuela's PDVSA oil company, acquiring and marketing most of the company’s oil output, which could effectively give the U.S. stewardship of most of the Western Hemisphere's oil reserves, when factoring in deposits in the U.S. and other countries where U.S. firms control production.
Some of the talks with Venezuelan government officials since President Maduro's capture and arrest have focused on how the U.S. can play a lead role in boosting production of the country’s large oil reserves, according to the WSJ report.
Energy Secretary Wright told Fox Business Network that he believed the U.S. would be able to increase oil production in Venezuela to ~1.2M bbl/day in the next 12-18 months, although he acknowledged it would take "many years" to get close to past levels of peak production above 3M bbl/day.
Wright also said he expected to see Chevron ( CVX) quickly increase its activities in Venezuela, with Exxon Mobil ( XOM) and ConocoPhillips ( COP) also looking to play a constructive role.
But crude prices already are low, and many companies see $50/bbl as a threshold below which it becomes unprofitable to drill, and a sustained period of low oil prices could decimate the U.S. shale industry.
A meaningful amount of Venezuelan crude into the U.S. Gulf coast region "could be years away," especially if U.S. companies other than Chevron ( CVX) balk at a major commitment to invest without security and financial guarantees, as well as a sufficiently high oil price to support investments, Ritterbusch and Associates said in a note.
The U.S. incursion into Venezuela "would have made more sense within a tight global oil market, rather than the surplus environment that currently exists," Riterbusch wrote.
Crude oil futures jumped more than 3% on Thursday, as buying interest resurfaced following a larger than expected draw in U.S. crude inventories, rebounding from headlines about potential Venezuelan barrels that had weighed on prices earlier in the week.
Front-month Nymex crude ( CL1:COM) for February delivery closed +3.1% to $57.76/bbl and front-month Brent crude ( CO1:COM) for March delivery ended +3.4% to $61.99/bbl, the largest one-day gain for both benchmarks since October 23.
U.S. natural gas futures ( NG1:COM) fell for the sixth time in seven sessions, getting little support from last week's reported 119 Bcf storage withdrawal that was in line with expectations; the front-month Nymex February contract finished -3.3% at $3.407/MMBtu. |
