Trump "U.S. will sell Venezuelan oil"…Middle East losing ground

"Will bring in up to 50 million barrels

Sale proceeds will be controlled directly by me"

Hits to exporters like Canada that have been selling to the U.S.

U.S. President Donald Trump said he would secure up to 50 million barrels of oil from the Venezuelan government and sell it on the market.

On the 6th (local time), President Trump wrote on SNS, "The Venezuelan interim government will deliver 30 million to 50 million barrels of high-quality oil that had been subject to sanctions to the United States." He added, "This oil will be sold at market prices, and the proceeds will be used under my control as President of the United States to benefit both the Venezuelan people and the American people." He further said, "I have instructed Chris Wright, Secretary of Energy, to execute this plan immediately," and added, "The oil will be transported by storage vessels and brought into U.S. ports."

Venezuela's reserves amount to 303 billion barrels, accounting for 17% of the world's. However, due to nationalization of production facilities and continued dictatorship, current production has fallen to $1,000,000 per day (1% of world production). Thirty to fifty million barrels equal 30–50 days' worth of production, and appear to include oil that could not be shipped following the Trump administration's tanker blockade operations. President Trump did not explain in detail whether this is temporary or whether payment will be made to the Venezuelan government.

The U.S. government is expected to sell this oil mixed with U.S. shale oil. Doug Burgum, U.S. Interior Secretary, said, "Heavy oil needs to be mixed with light oil, and thanks to shale oil there is an abundance of light oil here (in the United States)," adding, "Utilizing Venezuelan oil is good news for (U.S.) jobs and for future oil prices." Until now, the United States mainly mixed Canadian heavy oil and Middle Eastern Dubai crude and other heavy oils with shale oil to improve shale oil marketability, but going forward these could be replaced with Venezuelan oil.

Countries that have exported oil to the United States, such as Canada and Saudi Arabia and other Middle Eastern countries, will inevitably be hit. In particular, demand for Canadian oil, which accounts for 60% of U.S. oil imports, will take a direct hit. The influence of the Organization of the Petroleum Exporting Countries (OPEC) and Russia on the oil market will also diminish.

President Trump plans to increase Venezuelan oil production to lower oil prices. This runs counter to Trump's pledge to spark a domestic oil production boom. The Financial Times (FT) predicted that this measure would make it difficult for U.S. shale oil and gas companies to increase production.

There also appears to be an intent to check China, which had been a major export destination for Venezuelan oil. However, China's oil consumption is about 11.3 million barrels per day, and Venezuela's oil imports (300,000 barrels per day) account for only 2.6% of that, so it is unlikely to be a 'fatal blow' like rare earths.

The key issue is initial investment cost. President Trump told Republican members of the U.S. House of Representatives that day, "I will meet with oil companies (to request investment)." However, U.S. energy companies are reluctant to make specific comments because Venezuela's oil investment conditions and the reliability of stable oil procurement are uncertain. Only Continental Resources has publicly stated, "We will consider it."

Even if actual investment leads to Venezuelan oil production, the energy industry reports that, considering investment costs, initial production costs could reach more than $80 per barrel. In that case, it would be less price-competitive than Canadian heavy oil at $40–50 per barrel.

However, after production facilities are fully restored, production costs may become lower than those of Canadian heavy oil.

Washington = Correspondent Lee Sang-eun selee@hankyung.com