The Biden administration announced on Wednesday that it will relax sanctions against businesses that engage in trading or investing in oil from Venezuela. This decision comes in response to the country’s commitment to hold free elections in the coming year.
The decision goes against the previous U.S. efforts to remove President Nicolás Maduro from power. Even before the announcement was made on Wednesday, Republicans were criticizing Biden for appeasing oil-producing countries that are not friendly towards the U.S. This action may lead to more Venezuelan oil entering the global crude market, but it is not likely to significantly impact the consistently high prices caused by instability in Europe and the Middle East.
The Treasury Department announced that they will lift sanctions on crude oil and refined petroleum exports, as well as gold, for a period of six months.
The expiry date is intended to enable the penalties to be reinstated. if Maduro reneges on his promise to let independent candidates run in next year’s Venezuelan presidential election and to allow election experts and the international media to monitor it.
A high-ranking official from the administration announced during a press briefing that the US will offer some relief from sanctions, mainly in the oil and gas industry, in light of this significant progress. The primary aim of the sanctions is to encourage improved actions. However, the US government still has the power to modify or withdraw any authorizations if Maduro and his representatives do not fulfill their promises.
According to data from vessel tracking, Reuters stated that it is unlikely for the company to be able to export a significant amount in the near future, according to energy analysts.
According to market analysis firm Rystad Energy, the recent deal in the Venezuelan oil industry could potentially lead to a modest increase of 200,000 barrels per day in production in the near future. However, this increase is insignificant on a global level. The firm also noted that the announcement of the deal on Monday caused a decrease of approximately $1 per barrel in the global price of oil. As of late Tuesday, the price was just below $91 per barrel.
Last month, there was a sharp increase in the cost of oil, which raised concerns about reaching the significant mark of $100 per barrel. This has put pressure on Biden and other Democrats, who have been criticized by Republicans for the ongoing high prices of gasoline.
The GOP is pointing fingers at the president’s energy policies, claiming that they are hindering the production of U.S. fossil fuels. However, in reality, U.S. crude oil production is expected to reach record highs this year and even surpass them next year.
According to AAA, the mean cost of regular gasoline on Tuesday was $3.58 per gallon. This is a significant decrease from the record high of $5.02 in June 2022, which occurred after the price surge following Russia’s invasion of Ukraine.
The global issues are impacting the oil industry, including the concern of whether Biden will address the request to increase the enforcement of sanctions on Iranian oil exports to cut off their funding to Hamas.
Exports from Iran have significantly increased in the last year, despite efforts from the U.S. to resume negotiations for a nuclear deal. According to two industry lobbyists familiar with the situation, officials in the Biden administration are considering stricter enforcement of sanctions, potentially leading to a rise in oil prices. The lobbyists requested anonymity in order to protect the confidentiality of their conversations with administration officials.
In the event of this occurrence, the inclusion of Venezuelan resources in the market is unlikely to significantly affect worldwide oil prices.
According to Eli Rubin, a senior energy analyst at EBW, the Venezuela deal would have minimal impact. While the administration may be able to reach an agreement and generate positive attention, the bigger concerns in the market are Israel and Iran.