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Traders are still weighing the timing and impact of U.S. President Joe Biden’s decision on Saturday to ease oil sanctions on Venezuela and grant Chevron a license to resume oil production in the country.
Sanctions were implemented in August 2019 by the Trump Administration, and Biden’s decision to ease those sanctions came after the resumption of talks over the weekend between the socialist government of Nicolas Maduro and the Venezuelan opposition. Those talks led on Sunday to the signing of a U.S.-brokered accord between the government and the opposition in order to resolve the country’s political turmoil.
Chevron has now been granted a six-month license to resume pumping oil and generating oil revenues. Under the limited authorization, profits from the sale of oil and petroleum products would go to paying down debt to Chevron and not boosting state-run PDVSA’s profits.
Chevron is the only active U.S. oil company in Venezuela.
The market is now weighing whether this will have any significant impact on global oil output or whether this is more about furthering Washington’s agenda with respect to the presidential elections in 2024.
Chevron’s six-month license is not expected to increase Venezuela’s oil production by much or quickly. In October, Bloomberg cited Chevron CEO Mike Wirth as saying that it could take “months and years in order to begin to maintain and refurbish fields and equipment and change any investment activity.”
Washington has suggested that the intent behind the easing of sanctions was not to create an alternative to sanctioned Russian oil and would not likely impact oil prices.
Further decisions regarding sanctions on Venezuela will depend on whether Maduro makes good on commitments he made in the “social contract” signed with the opposition on Sunday, according to senior administration officials, as reported by the Associated Press.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com