US refineries are in battle while the White House considers sanctions against Venezuela

Refineries in the United States are increasing their bets to gain access to the poor varieties of crude oil needed for their more sophisticated plants at a time when the government reconsiders the application of stricter sanctions for Venezuela, which could further reduce oil imports.

Officials of the government of President Donald Trump have met in recent days with oil executives in the United States to present potential actions in response to the start of the new mandate of the Venezuelan Nicolás Maduro on January 10, in an election that they consider illegitimate .

Among other things, US officials recognized the Venezuelan Congress, controlled by the opposition, as the only legitimate democratic institution.

But the proposals that would most affect the oil industry include the ban on exporting refined products from the US to Venezuela or limiting oil imports, a measure the White House has not yet adopted even after sanctioning people and banning Access to oil. the American bank.

"It's more serious than I've heard before," said a refinery industry executive who is familiar with discussions with the White House. "They are preparing to pull the trigger if necessary."

US refineries have few supply alternatives if the Trump government reduces Venezuelan crude imports. The heavy flocks preferred by many Gulf refiners have been more difficult to find in recent months due to cuts and reductions in production from western Canada, Mexico and Venezuela.

US companies that depend on Venezuelan oil have opposed the previous proposals that would stop imports and have done so again this week, several people have said close to the talks.

Two major refineries – Phillips 66 (PSX.N) and PBF Energy (PBF.N) – cut direct purchases of crude from the Venezuelan state oil company PDVSA last year, according to data from the Energy Information Administration (EIA) . in English).

Councilors from Latin America warned Washington that oil sanctions could be counterproductive by making it appear that the US is forcing political change in Venezuela, said a person who is familiar with the White House talks, the Council of national security and oil companies.

The source said that Secretary of State Mike Pompeo was directly involved in the issue, accelerating possible financial and political measures against Maduro.

State Department spokespersons were not immediately available for comment.

Venezuela exported 500,013 barrels of crude oil per day in the United States last year, compared to 591,422 bpd in 2017. The main buyers were the subsidiary of PDVSA, Citgo Petroleum; Valero Energy (VLO.N) and Chevron Corp (CVX.N).

"The careful approach of the United States in recent days – not imposing sanctions only after the proclamation of Maduro – suggests that the next step could be the significant escalation of pressure to try to restore the democratic order," he said Barclays. in a note to investors.

The options on the table range from the ban on the sale of American thinners in Venezuela, which are used to create exportable raw mixtures, to the recognition of an alternative government to Maduro, which would allow the international community to freeze Venezuela's assets and revenues, added Barclays.