Sanctions on Venezuela will require major restructuring in the logistics of the global oil market

31 january 2019 | Russia 24

"Even if Venezuela stops selling oil to the USA, it doesn't mean that nobody else will buy it from them. China may buy the oil. However, that is bound to require major restructuring in the logistics," said Alexander Kurdin, Head of Research at the Fuel and Energy Department of the Analytical Center, in his interview to Russia-24 TV.

Alexander Kurdin
Alexander Kurdin
Department for Fuel and Energy Sector

The expert went on to explain that at the moment everyone was still reeling from the new sanctions but that it was yet difficult to say how they were going to be implemented. A lot depends on the response of Venezuela, the corporate sector reaction as well as on how the USA market will be getting replacements for Venezuelan oil, the expert is convinced.

According to Mr. Kurdin, 90% of Venezuelan oil exports go to the USA, China and India. Meanwhile, some 400 thousand barrels of oil and petroleum products are supplied from the USA to China. "If the Americans redirect that oil to their domestic market to compensate for the loss of the Venezuelan oil, a shortage of oil will result in China which they will be able to cover with the Venezuelan oil. There are no reasons for why that can't happen. This kind of restructuring of sales is going to take time and short-lived acute shortages of 1-2 months are possible during that readjustment period," the expert explained.

He pointed out that Venezuela's oil production has been declining gradually for several years now. Before the extension of the OPEC+ agreement under the new conditions, the lacking Venezuelan oil was compensated for by other OPEC nations, first of all by Saudi Arabia. "Currently, the OPEC+ members assumed new obligations and if they violate them it can negatively impact their reputation," Mr. Kurdin noted. "In my opinion, Saudi Arabia is interested in keeping the OPEC+ mechanism that is currently in place."

Source: Russia-24 TV