Venezuela oil infrastructure needs to be assessed, says Lipow Oil Associates' Lipow

Summary

Andrew Lipow of Lipow Oil Associates discusses the oil market after the U.S. capture of Venezuela's Nicolas Maduro. He says Venezuela's oil industry is in disrepair, so any material production increase would take years and tens of billions of dollars. Near term, Venezuelan output is unlikely to change much, though Chevron may add incremental barrels. If sanctions ease, Venezuelan heavy sour crude could benefit Gulf Coast refiners, compete with Canadian heavy oil, and displace some Middle East heavy sour imports.

• Venezuela oil industry is in disrepair and needs infrastructure assessment.
• Material production growth would require $10 billion per year for a decade.
• Near-term Venezuelan oil supply is not expected to change significantly.
• Chevron may see incremental supplies from existing Venezuela operations.
• Venezuelan heavy sour crude would be good news for Gulf Coast refiners.
• Canadian heavy oil could face competition, but new Pacific pipeline capacity may redirect barrels to China.
• US Gulf Coast may reduce imports of Middle East heavy sour crude.
• Sanctions on shadow fleet complicate Chinese purchases of Venezuelan oil.