US may swap Venezuelan oil to replenish strategic reserve
The United States may swap heavy Venezuelan oil for light or medium crude produced in the US to replenish the Strategic Petroleum Reserve. US Energy Secretary Chris Wright spoke about this option in an interview with CNBC, the Jerusalem Post reports.
According to Wright, the swap could involve transferring a barrel of heavy oil in exchange for a barrel of light or medium crude from the US. He also described oil markets as flexible. US President Donald Trump had previously stated that oil under the recently concluded agreement with Venezuela would be used to replenish the reserve.
Quality of Venezuelan oil
Traders and analysts noted that Venezuelan oil is mostly unsuitable for storage in the US strategic reserve due to its high density and sulfur content. The reserve is the world's largest emergency oil stockpile and is stored in underground caverns along the coasts of Texas and Louisiana.
According to the US Department of Energy, oil in the reserve usually contains no more than 1.99% sulfur by weight. Venezuelan Merey-16 and Boscan grades have higher sulfur content and are denser than the oil that predominates in the reserve's stocks.
More current news is available on the UA.News Telegram channel Telegram.
Jeremy Irwin, head of global oil market analysis at Energy Aspects, said that most grades exported by Venezuela are incompatible with the reserve's caverns in terms of quality characteristics. A 2016 US Department of Energy report to Congress stated that the costs of storing heavy oil outweigh the potential benefits.
Possible swap mechanism
US authorities have previously used oil swaps to release and acquire stocks. Currently, oil from the strategic reserve is loaned to companies, which must later return it with an additional volume of barrels as a premium.
Experts estimate that US refiners may accept additional volumes of heavy Venezuelan oil, although demand may be limited. Its processing requires specialized facilities with specified capacity, while building new such facilities is an expensive and lengthy process.
