Oil Holds Loss as Traders Weigh More US Control Over Venezuela

(Bloomberg) — Oil held onto declines as traders digested more measures from the US to exert control over Venezuela, including a plan to indefinitely manage future crude sales.

West Texas Intermediate traded near $56 a barrel after losing 3% over the previous two sessions. Energy Secretary Chris Wright said the US would initially start offering stored crude, while the Energy Department said oil was already being marketed.

Most Read from Bloomberg

Petroleos de Venezuela SA, the state oil company, said it’s in negotiations with Washington over selling crude through a framework similar to an arrangement with Chevron Corp., the only American major operating in the country.

The US would have some control over PDVSA under the plan, the Wall Street Journal reported, citing people familiar with the matter. President Donald Trump told the New York Times that US oversight of the country could last years and that “the oil will take a while.”

The White House is pushing for US companies to rebuild Venezuela’s energy industry, which is in poor shape after years of neglect, and Trump is due to meet energy executives on Friday. The administration has started selectively rolling back sanctions on the country’s oil sector as part of that effort.

Citgo Petroleum Corp., the US refiner indirectly owned by Venezuela, is considering resuming purchases for the first time since sanctions cut off its supply in 2019, while Trafigura Group has also expressed interest. Chevron is in talks with the US to extend its license to operate in the country.

On Tuesday, Trump said Venezuela would relinquish as much as 50 million barrels to the US, worth more than $2 billion, and announced cargoes would be sold with proceeds to benefit both nations. Revenue from sales will be held in US Treasury accounts, according to a person familiar with the matter.

“It is important to hold onto the fact that Venezuelan production wll not suddenly explode,” said Ole Hansen, head of commodities strategy at Saxo Bank. “The net global balance will not change anytime soon, but it will impact individual buyers and sellers.”

China has been the main buyer of Venezuelan oil, which was heavily discounted following US sanctions. Beijing criticized the Trump administration’s reported call for Caracas to sever alliances with US rivals, labeling it a “bullying act.” The move was reported by ABC News.

Soft Start