SEATTLE (Oil Monster): The U.S. has decided to reverse its stance on Venezuela, reauthorizing the company’s operations in the Latin American country. The decision is likely to spark huge correction in crude oil prices. The details of the new order are yet not available, but it is expected to ease supply in the global market.
The resumption of U.S. purchases of Venezuelan crude oil is expected to result in a downward correction in Canadian oil prices, both in the U.S. and in Asia. It must be noted that the Western Canadian Select (WCS) crude is currently priced near record highs against WTI.
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The U.S. policy reversal will have a significant impact on Chinese teapot refiners. China has been the main export market for Venezuelan crude since the United States imposed sanctions. Approximately 650 kbd of oil were shipped to China, which is significantly more than the 370 kbd monthly average exports from January to May of this year.
The United States may resume naphtha supplies to Venezuela if sanctions are lifted in order to boost upstream operations, which might lead to higher oil output. The pre-stocking of U.S. naphtha in April and May has helped the nation record consistent oil output.
