Trump Says Venezuela to Send Oil Worth Up to $2.8 Billion to US

(Bloomberg) — President Donald Trump said Venezuela would relinquish as much as 50 million barrels of oil to the US, worth roughly $2.8 billion at the current market price, announcing the cargoes would be sold with proceeds benefiting both countries.

The announcement late on Tuesday, which came with few details, marked a significant step up for the US government as it seeks to extend its economic influence in Venezuela and beyond after the capture of leader Nicolas Maduro over the weekend. It’s also a blow to China, previously the top buyer of the country’s oil and a close partner.

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“I am pleased to announce that the Interim Authorities in Venezuela will be turning over between 30 and 50 MILLION Barrels of High Quality, Sanctioned Oil, to the United States of America,” Trump wrote in a social media post.

“This Oil will be sold at its Market Price, and that money will be controlled by me, as President of the United States of America, to ensure it is used to benefit the people of Venezuela and the United States!” he added.

The volumes cited by Trump would represent about 30 to 50 days of Venezuelan oil production before the US’s partial blockade of the country — much reduced from historic levels. West Texas Intermediate, the US oil benchmark, fell as much as 2.4% after Trump’s comments and is currently trading at close to $56.40 a barrel.

US President Donald Trump is set to meet with energy executives at the White House to enlist Western companies in rebuilding Venezuela’s oil industry. Bloomberg’s Tyler Kendall reports.Source: Bloomberg

Representatives of the US Energy Department and the White House didn’t respond to requests for more detail. Venezuela’s information and oil ministries also didn’t respond to requests for comment.

Venezuela has the world’s largest proven crude reserves, but its production has dropped sharply due to decades of neglect and the exodus of many foreign oil companies. The country now accounts for less than 1% of global supply. Analysts have said that it will take years and billions of dollars of investment to significantly revive output.

Trump did not specify the exact origin of the oil. Venezuela does have a backlog of unshipped crude that has been piling up in storage tanks and aboard contracted ships since the US blockade began last month. Petroleos de Venezuela SA, the state-owned oil company, has been rapidly running out of space as the blockade drags on, according to maritime intelligence firm Kpler.

Chevron Corp., meanwhile, is the last American company that’s still producing and exporting barrels from Venezuela under an exemption from US sanctions. It has booked a fleet of at least 11 ships to sail to the government-controlled ports of Jose and Bajo Grande.

A Chevron representative didn’t immediately respond to requests for comment.

“Even at the high end, 30 to 50 million barrels sounds big politically, but it is small economically,” said Haris Khurshid, chief investment officer at Karobaar Capital LP. “That’s a one-off flow, not a structural supply shift.”

Trump said in his post that the sanctioned oil would be “taken by storage ships, and brought directly to unloading docks in the United States.” Energy Secretary Chris Wright had been tasked with executing the plan “immediately,” he said.

Venezuelan oil is particularly suitable for refineries along the US Gulf Coast, many of which were built to process such heavy-sour crudes. These plants run by the likes of Phillips 66 and Valero Energy Corp. may stand to benefit from these shipments. Their share prices jumped on Monday after Maduro was seized.

Some of the oil may also find its way to commercial storage tanks, potentially bolstering stockpiles that are currently near five-year seasonal lows.

ABC reported separately on Tuesday that the Trump administration has told Venezuela’s interim leader, Delcy Rodriguez, her government must exclusively partner with the US on oil production and favor the US when selling heavy crude.

The White House is also demanding that Venezuela reduce its economic ties to China, Russia, Iran and Cuba, ABC reported, citing three unnamed people familiar with the situation. Doing so would represent a full political realignment for Venezuela, which has relied heavily on the quartet for economic and security stability in recent years.

Prior to the US’s blockade and the capture of Maduro, China was the main beneficiary of the South American nation’s heavily discounted oil. That trade has now largely stopped, save for cargoes that are already in Asia, and Beijing may now need to explore other options such as Iraqi or Canadian crude.

Washington’s effort to cut off that lifeline for the Venezuelan government has been going on for weeks, with tankers targeted by US forces. They have pursued the Bella 1, an empty oil vessel, into the Atlantic. Russia has now sent a submarine and other naval assets to provide an escort for the ship, the Wall Street Journal reported.

–With assistance from Josh Wingrove, Rob Verdonck, Crayton Harrison, Joe Carroll, Nathan Risser and Lucia Kassai.