Venezuela's Oil Production Rises 18% in October 2022 Amid Sanctions Changes

Venezuela's oil production rose 18% to 717,000 barrels per day in October 2022, according to secondary sources in OPEC's latest oil market report. This increase comes as the Biden administration announced it will not renew the General License 44, which had authorized transactions related to Venezuela's oil and gas industry.

The U.S. has granted a 45-day wind-down license to allow companies to gradually conclude their operations in Venezuela. Chevron, the largest contributor to the country's recent short-term growth, will still be allowed to produce and export volumes to the U.S. under a separate license. The U.S. has also indicated it will consider requests by companies for special licenses to operate in Venezuela beyond the wind-down period.

Venezuela's oil exports reached a record high of 900,000 barrels per day in March 2024 as customers rushed to complete purchases ahead of the predicted expiration of the license. The withdrawal of this sanctions relief marks a step back from President Biden's policy of re-engagement with Venezuelan President Nicolás Maduro, though it stops short of a return to the "maximum pressure" campaign under former President Trump.

Why this matters: The changes in US sanctions policy towards Venezuela's oil sector could significantly impact the volume and quality of the country's crude oil sales and fuel. Venezuela's state oil company PDVSA now faces the prospect of resorting to lesser-known intermediaries to sell its oil at discounted prices, mainly to Asia, unless enough individual U.S. authorizations are issued. PDVSA's finances, already eroded by five years of sanctions, will also take a new hit, limiting its access to hard currency needed for operations.

The U.S. Treasury Department's Office of Foreign Assets Control (OFAC) has left the door open for parties to apply for specific licenses to continue transactions previously covered by the general license. Two other licenses allowing limited operations by Chevron, Repsol, and Eni also remain in place, indicating that not all sanctions have been reinstated and there may be room for political negotiations going forward.

Key Takeaways

• Venezuela's oil production rose 18% to 717,000 bpd in Oct 2022.
• U.S. will not renew General License 44, allowing transactions with Venezuela's oil industry.
• Chevron can still produce and export oil to U.S. under a separate license.
• Venezuela's oil exports hit a record 900,000 bpd in March 2024 before license expiry.
• U.S. sanctions changes could impact Venezuela's oil sales, finances, and operations.