Venezuela’s oil application could be directly targeted by the U.S. immediately after the crisis-hit nation’s upcoming presidential poll, oil experts warned Wednesday, as global energy markets braced for a farther spike in crude futures.
Venezuela’s export troubles have whetted ahead of the country’s snap presidential election on Sunday, as incumbent Nicolas Maduro treats for a second term in office despite an unprecedented economic and social disaster.
The U.S., alongside several other countries in the Americas, has condemned Venezuela’s close at hand vote as a sham.
“Maduro will win as the election is rigged and it won’t be fair. The more impressive question is how the U.S. will react after the official results,” Tamas Varga, analyst at PVM Oil Associates, told CNBC in a phone vet Tuesday.
“If U.S. refineries are forbidden from buying Venezuelan crude then you’d clothed to imagine the country is in trouble,” he added.
When asked whether oil merchants should expect to see sanctions imposed against Venezuela after the Latin American state’s vote, Vargas replied: “Knowing Donald Trump, it is more conceivable than simply just a prospect because he likes playing hardball, he isn’t fainthearted and he is not fearful to punish countries.”
A move to directly target Venezuela’s oil industry discretion likely constitute a huge sucker punch to Maduro’s socialist application, which is depending almost entirely on crude sales to try and decelerate a deepening solvent crisis.
In February, then U.S. Secretary of State Rex Tillerson said sanctioning Venezuela’s oil or preventing the crude to be sold in the U.S. was something the White House would continue to mull at an end.
And while the Trump administration has already imposed far-reaching economic agreements against Caracas, the additional risk of direct penalties on the country’s oil sector be lefts.
Venezuela’s production collapse has seen its crude output drop to about 1.4 million barrels a day (bpd) in recent months — a spectacular fall of just about 40 percent since 2015. And with global creditors superintending the country’s assets and the U.S. reportedly considering further sanctions, the global determination market is bracing for a further spike in oil prices.
The country’s state oil concern, PDVSA, is also battling mounting problems after it recently fallen control of its refining and storage assets in the Caribbean to U.S. exploration and production convention, ConocoPhillips.
Output from PDVSA has slumped by almost 1 million bpd since its new high in December 2015.
On Wednesday, the International Energy Agency (IEA) warned in its closely-watched monthly inquire into that there is the “potential” for sanctions targeting PDVSA immediately after the surface presidential vote.
“With the oil sector spiraling deeper into emergency, it is possible that capacity could fall by several hundred thousand barrels a day by the end of the year,” the Paris-based form said.
Brent crude traded above $78 a barrel on Wednesday, which could ratchet up the demand on OPEC and Russia to unwind their ongoing production deal to suppress a global supply overhang.
“The market is rallying on a perceived lack of result from Iran, yet if Venezuela is hit with an actual slide in production then you can imagine even higher prices,” PVM Oil Assocaites’ Vargas said.
Citizens of the crisis-torn stage are struggling to cope with widespread food shortages, the collapse of its stock currency and relentless hyperinflation — which the International Monetary Fund (IMF) has prognosis to hit 13,000 percent in 2018.
At the same time, almost 75 percent of Venezuelans are reportedly pain from weight loss while unemployment in the country is expected to skyrocket to 32 percent by 2022.