Daily Energy Report
US suspends Venezuela sanctions, Devon mulls M&A, Diesel’s high margins, China carbon tax challenge, Permian gas, EU subsidizes wind, Russian LNG, Fuel economy blowback, and more.
Chart of the Day: Venezuela’s Crude Oil Production.
The News
US Treasury: Treasury Issues New Venezuela General Licenses
Reuters: Venezuela’s Oil Sanctions Relief Offer No Fast Output Rebound
Reuters: Venezuela pursuing former oil clients after US sanctions lift
Reuters: OPEC+ sees no major impact from Venezuela sanctions easing - sources
Bloomberg: Joe Manchin Slams Sanction Relief for Venezuelan Oil and Gas
Politico: "Beyond absurd": GOP savages Biden easing of Venezuelan oil sanctions
Summary
The U.S. Treasury has issued four General Licenses in response to the signing of an electoral roadmap agreement between Venezuela's Unitary Platform and the Maduro government. These licenses suspend select sanctions, including oil. Even with the relief, output is only expected to grow by between 170,000 and 200,000 b/d in the next two years.
Figure (1) above shows Venezuela’s crude oil production as reported by OPEC.
EOA’s Main Takeaway
As we mentioned in previous reports, the impact is very limited. In our 2023 oil market outlook, we predicted that if sanctions are lifted, Venezuela can add 30,000-400,000 b/d in the short run and that is it. Now that Chevron added 200,000 b/d, only 100,000 to 200,000 are left. It will take a long time for Venezuela to increase its production by 1 mb/d.
When President Trump imposed sanctions on Venezuela in 2018, the decision was bipartisan and political. Now the reverse of the policy by President Biden is the same. This explains the Republican anger at the move. Senator Joe Manchin has the right to get angry because the Biden Administration did everything in its power to kill the coal industry in his state, West Virginia, only to lift sanctions on Venezuelan heavy crude.
So, before chasing former oil clients, Venezuela needs to have the oil first! This explains why OPEC is not worried!
Story of the Day
EIA: Permian Basin Producing More Associated Gas
Summary
The EIA predicts natural gas production in the Lower 48 states will grow by 5% in 2023 and 2% in 2024. The majority of this growth is expected to come from the Permian region, driven by improved well-level productivity and higher crude oil prices, which will stimulate drilling activity. EIA forecasts a significant increase in natural gas production in the Permian, up 11% in 2023 and 6% in 2024. Figure (2) below shows Permian’s natural gas production.
