Chevron’s Potential Exit from Venezuela Could Pressure U.S. Gulf Coast Refiners
Chevron’s possible exit from Venezuela, influenced by President Trump’s actions, could reduce Venezuela’s crude production significantly, which may lead to higher costs for U.S. Gulf Coast refiners. If OPEC+ does not compensate for this loss, refiners like PBF, Phillips 66, and Valero could face increased procurement expenses as Brent and WTI crude prices rise.
Chevron is contemplating its potential exit from Venezuela, which may have significant implications for refiners located on the U.S. Gulf Coast, according to TD Cowen analysts. The crude markets seem to be gaining support following U.S. President Donald Trump’s repeal of a license previously granted to Chevron, allowing operations in Venezuela. This decision could influence crude prices and trading in the region.
Brent crude futures saw a 1.6% increase, reaching $73.69 per barrel, while U.S. West Texas Intermediate crude oil futures rose 1.79%, settling at $69.84 per barrel. The continued fluctuations in crude prices come in the backdrop of Chevron assessing the ramifications of the President’s announcement, which they confirmed they are currently evaluating.
TD Cowen estimates that Chevron’s departure could lead to a reduction in Venezuelan crude production by approximately 200,000 barrels per day. They noted that OPEC+ could potentially offset this drop by enhancing output, albeit this adjustment might not alleviate cost pressures on U.S. refiners.
In the event that OPEC+ does not increase supply, U.S. refiners may face elevated procurement costs for heavy sour crude. According to TD Cowen, refiners heavily reliant on coastal heavy and medium sour crude could be the most adversely affected. PBF Energy is identified as particularly vulnerable, with Phillips 66 and Valero also having considerable exposure to these specific crude price fluctuations.
Chevron’s previous disclosures indicate that it derived less than 2% of its 2023 cash flow from Venezuela operations, which translates to approximately $600 million for 2024 based on joint ventures producing 200,000 barrels per day. Notably, Venezuelan crude exports to the U.S. peaked at 310,000 barrels per day in December 2024, with the vast majority directed to the U.S. Gulf Coast.
In summary, Chevron’s potential exit from Venezuela could drastically affect U.S. Gulf Coast refiners due to decreased production and increased crude procurement costs. The impact is especially pronounced among refiners with high exposure to heavy sour crude prices. If OPEC+ does not enhance output to fill the gap, prices may escalate further, affecting refinery operations and costs.
Original Source: www.tradingview.com
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