Return of U.S. Oil Sanctions Would Clip Venezuela’s Output Gains

A possible re-imposition of U.S. oil sanctions on Venezuela next month would stagnate the OPEC-member country’s crude output, wiping out the small gains it has achieved in recent years, analysts said on Tuesday.

Washington has said it will allow to expire a temporary license it granted last year to Venezuela as part of negotiations for a fair presidential election if the government does not allow an internationally observed election with participation of a candidate chosen by the opposition.

The license has allowed state oil company PDVSA to resume crude exports to some of its established customers, ease price discounts and slowly boost oil output to 783,000 barrels per day (bpd) last year, compared with 569,000 bpd in 2020.

Production is expected to grow slightly between 2024 and 2026, declining from then on if oil sanctions are fully restored, said Francisco Monaldi, an expert on Latin American energy policy with Rice University’s Baker Institute.

If the temporary license is extended or granted again at least partially, that would fuel a modest increase, driving output to slightly above 1 million bpd from 2025 on, according to a forecast by consultancy Rystad Energy shown by Monaldi at a conference organized by Harvard University.

“There is still room for a scenario where U.S. license 44, granted in October, is renewed at least partially if (Venezuelan President Nicolas) Maduro does the bare minimum to meet the electoral conditions set as part of the Barbados agreement,” Monaldi said.

It remains unclear what will happen with other authorizations granted by Washington since 2022, including to producers Chevron, Eni, Repsol and Maurel & Prom.

If those individual licenses remain, production would still decline but not collapse, Monaldi said.

Maduro and the opposition last year signed an agreement in Barbados setting conditions for a presidential election later this year. They included international observation, the withdrawal of legal bans to opposition candidates and guarantees for a transparent process. Maduro has failed to progress on most.

(Reporting by Marianna Parraga; editing by Gary McWilliams)