Washington and Caracas are in negotiations to sell Venezuelan oil to the United States, sources suggest

Officials in Caracas and Washington are in talks regarding the export of Venezuelan crude to U.S. refiners, according to five sources from government, industry, and shipping who spoke to Reuters on Tuesday. This potential agreement could redirect supplies from China and assist state company PDVSA in mitigating further output reductions.

The discussions mark the initial indication that the Venezuelan government is reacting to President Donald Trump’s insistence that they allow U.S. oil companies access or face the possibility of increased military intervention. Trump has expressed his desire for interim President Delcy Rodriguez to grant the U.S. and private companies “total access” to Venezuela’s oil industry.

Venezuela possesses millions of barrels of oil stored in tankers and storage facilities that it has been unable to export because of a blockade on shipments implemented by Trump since mid-December.

The blockade was a component of increasing U.S. pressure on the administration of Venezuelan President Nicolas Maduro, which reached a peak this weekend when U.S. forces apprehended him. High-ranking Venezuelan officials have labeled Maduro’s capture as a kidnapping and have charged the U.S. with attempting to seize the nation’s extensive oil reserves.

According to two sources, a possible agreement to sell the trapped crude to the U.S. may necessitate the reallocation of cargoes that were originally intended for China. In the past decade, the Asian nation has emerged as Venezuela’s leading buyer, particularly following the imposition of U.S. sanctions on companies engaged in oil trade with Venezuela in 2020.

“One of the oil industry sources remarked, ‘Trump is eager for this to occur soon so he can claim it as a significant victory.'”

No immediate comments were made by the White House, Venezuelan government officials, or PDVSA.

Chevron is overseeing the flow of Venezuelan oil to the United States.

The supply would enhance the volume of Venezuelan oil exported to the U.S., a flow that is presently managed solely by Chevron, PDVSA’s primary joint venture partner, under a U.S. authorization.

Chevron has been exporting between 100,000 and 150,000 barrels per day (bpd) of Venezuelan oil to the U.S. It stands out as the only company that has been loading and shipping crude without interruption from the South American country in recent weeks amid the blockade.

The method by which sanctioned PDVSA would obtain funds from oil sales was not immediately evident. Sanctions result in the company’s exclusion from the global financial system, leading to frozen bank accounts and a prohibition on executing transactions in U.S. dollars.

Rodriguez, who was sworn in as interim president on Monday, is currently under U.S. sanctions that were imposed in 2018 for undermining democracy.

Discussions include potential auctions with buyers from the United States.

This week, officials have engaged in discussions regarding potential sales mechanisms. These include auctions that would enable interested U.S. buyers to bid on cargoes, as well as the issuance of U.S. licenses to PDVSA’s business partners, which could pave the way for supply contracts, according to two sources.

In the past, those licenses have enabled PDVSA’s joint venture partners and customers, such as Chevron, India’s Reliance, China National Petroleum Corporation, and European companies Eni and Repsol, to access Venezuelan oil for refining or resale to third parties.

This week, several companies have started to prepare for the reception of Venezuelan cargoes once more, according to two sources.

Discussions have taken place between the U.S. and Venezuela regarding the potential use of Venezuelan oil in the U.S. Strategic Petroleum Reserve in the future, according to one of the sources.

Heightened oil flows would be excellent news.

On Tuesday, U.S. Interior Secretary Doug Burgum stated that a rise in Venezuelan heavy oil flow to the U.S. Gulf would be beneficial for job security, future gasoline prices in the U.S., and for Venezuela itself.

“Venezuela currently has a chance to attract capital and revitalize its economy,” he stated to Fox News when discussing the negotiations between the governments regarding oil exports. “Through American technology and partnership, Venezuela has the potential for transformation.”

Refineries located on the Gulf Coast of the U.S. are capable of processing heavy crude grades from Venezuela and were importing approximately 500,000 barrels per day (bpd) prior to the initial energy sanctions imposed by Washington on Venezuela.

PDVSA has had to reduce production as a result of the embargo, as it is running out of storage for the oil. According to one of the sources, if PDVSA does not identify a method to export oil promptly, it may need to further reduce production.

Oil traders responded to the news of the discussions on Tuesday. Differentials for certain heavy oil grades in the U.S. Gulf decreased by approximately 50 cents per barrel on Tuesday due to the anticipated increase in Venezuelan supplies.