In a significant move concerning global energy markets, former US President Donald Trump declared that Venezuela's interim government will hand over a massive stockpile of oil to the United States. The announcement, made via his Truth Social platform, outlines a plan where the US government will control the proceeds from the sale.
The Announcement and Immediate Plan
Donald Trump stated on Tuesday that the interim authorities in Venezuela are set to turn over between 30 million and 50 million barrels of what he termed "high quality, sanctioned oil" to the United States. He emphasized that the crude would be sold at prevailing market prices.
"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!" Trump wrote in his post. He further directed Energy Secretary Chris Wright to "execute this plan, immediately," noting the oil "will be taken by storage ships, and brought directly to unloading docks in the United States."
Logistics, Volume, and Market Impact
A senior US administration official, speaking anonymously to CNN, provided crucial details. The oil has already been produced and is stored in barrels, with most currently on vessels. These ships will now be diverted to refining facilities on the US Gulf Coast. The official indicated the transfer would happen rapidly because Venezuela's heavy crude cannot be stored for long periods.
While the volume of up to 50 million barrels sounds substantial, analysts suggest its impact on US fuel prices may be limited. For context, the United States consumes just over 20 million barrels of oil per day. In 2022, President Joe Biden's release of 180 million barrels from the Strategic Petroleum Reserve lowered petrol prices by 13 to 31 cents per gallon over four months.
Oil markets reacted modestly to the news, with US crude prices falling by about $1, or just under 2%, to $56 per barrel. At current prices where Venezuelan oil trades around $55 per barrel, the sale could generate significant revenue, ranging from $1.65 billion to $2.75 billion.
Source of the Oil and Venezuelan Reserves
The oil is expected to come from a combination of onshore storage in Venezuela and from seized tankers that were previously transporting Venezuelan crude. The country has accumulated large stockpiles since the US imposed an oil embargo late last year.
Industry experts shed light on the scale. Phil Flynn, senior market analyst at Price Futures Group, noted Venezuela has about 48 million barrels of onshore storage capacity, which was nearly full. Additional estimates suggest seized tankers were carrying between 15 million and 22 million barrels of oil. Transferring the announced volumes to the US could, therefore, significantly reduce Venezuela's available reserves.
The timeline for the complete handover remains unclear, but the senior official's comments point towards a swift process. The White House has been contacted for further details on the unprecedented arrangement.
