American oil policy got a little bit murkier on Thursday after Washington ditched a Venezuelan oil deal, Mexican exports fell by more than a third and US president Donald Trump prepared to move ahead with tariffs on Alberta oil imports.
Trump announced the decision on Truth Social media platform, stating that he was “hereby reversing the concessions that Crooked Joe Biden gave to Nicolás Maduro under a 2022 oil transaction agreement.”
The move, which takes effect on March 1, is expected to disrupt Venezuela’s economy and further tighten global oil markets already under pressure due to a sharp decline in Mexican crude exports and looming tariffs on its largest source of imported crude from Canada. Venezuela is also a member of OPEC.
All three countries provide a heavier barrel favoured by US Gulf Coast refiners. Despite a 10% tariff, it will be extremely difficult if not impossible for American processors to swap out supplies from Canada from either Mexico or Venezuela.
The Venezuelan licence had allowed Chevron to run joint ventures with Venezuela’s state-run oil company, PDVSA, providing one of the few remaining sources of US dollars to the Maduro government despite broader sanctions.
Trump justified the revocation by citing Maduro's failure to meet “electoral conditions” and its alleged slow pace in accepting deported Venezuelan migrants, including individuals he described as “violent criminals.”
Predictably, the Venezuelan government condemned the decision, warning that the sanctions could lead to increased migration to the US — a scenario Trump has pledged to prevent.
The decision immediately impacted oil prices, which rose more than 1% on Thursday. Global supplies were already tightening before the announcement, as Mexico’s state-owned oil company Pemex reported a 44% drop in crude exports in January, its lowest level in decades.
Pemex shipped just 532,404 barrels per day (bpd) last month, down from over a million bpd just two years ago. Exports to the Americas, primarily the US, fell 36% year-over-year to 320,944 bpd though Pemex insisted that the problem was temporary.
The combination of declining Mexican exports and the Venezuelan sanctions could lead to further market instability, particularly for Gulf Coast refineries that have historically processed heavy crude from Latin America.
The alternative is, of course, Alberta, which the White House insisted on Wednesday will face 10% tariffs starting March 4 and not April 2 as Trump himself previously insisted.
That in turn caused oil prices to spike nearly 2% on Thursday after languishing for much of Thursday.
North American benchmark West Texas Intermediate (WTI) was up USD$1.47 to $70.46 per barrel, the highest in almost a week, while European Brent was trading hands for $74.
Alberta’s Western Canadian Select, which trades at a discount to WTI, closed Wednesday — the last trading day — at $56.27, down 31 cents.
