Trump cancelling Chevron's permit in Venezuela hurts the US Gulf the most

President Trump has announced he will reverse a licence granted to Chevron in late 2022, which gave the US supermajor the ability to operate in Venezuela.

Market & Trading Calls

• Bullish on Maya and Western Canadian Select (WCS) with Venezuelan barrels cut off, demand for alternative heavy crudes in the US should rise.
• Bearish on Venezuelan production post-August, we expect a drop from ~900 kbd to ~700 kbd as export limitations force shut-ins.
• US Gulf Coast refiners may turn to alternative sources, increased imports from Canada and Latin America are likely to fill the gap.
  

Ending the licence means that Chevron will no longer be able to export crude, which, ironically, will have the most significant impact on the United States, particularly the US Gulf Coast. After President Biden granted Chevron the licence in November 2022 - which renews every month - exports of Venezuelan crude to the US returned in January 2023 after a nearly four-year absence. As the chart below illustrates, US imports of Venezuelan crude have climbed to 300 kbd in recent months, with the vast majority heading in the refining hub of the US Gulf Coast, while a small but consistent flow heads to the US East Coast.

Imports of Venezuelan crude by PADD, kbd

Source: Kpler

Back mid-last decade, before sanctions, Venezuela accounted for 16% of total US seaborne crude imports. The granting of the licence to Chevron has seen Venezuelan crude inflows rebound again, accounting for 8% of total seaborne imports last year. The decision to cancel Chevron’s licence comes as the US Gulf Coast is already struggling to pull in heavy sour barrels. As Mexican refining activity picked up last year and production continued to drift lower amid structural decline, Mexican crude imports into the US dropped by a third compared to the prior year, falling 265 kbd y/y to 480 kbd. A 100 kbd y/y increase from Venezuela helped to mitigate part of this loss.

Venezuelan crude imports as % of total seaborne imports

Source: Kpler

While Chevron’s licence may be renewed each month, its cancellation gives Chevron six months’ notice, meaning it can continue operations until 1 August. We had previously expected the US administration to target Venezuela sooner, reducing its production over H1 2025, but now, in our balances, we have production holding steady at ~900 kbd until August. At this point, we incorporate the halting of Chevron’s licence, ultimately resulting in Venezuelan production taking a step lower to ~700 kbd.

Venezuela crude supply, kbd

Source: Kpler

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