The red flags of an imminent U.S. embargo on Venezuelan crude are already apparent, according to an oil analyst, with ramifications of such a move likely to exacerbate an unprecedented economic meltdown.
"The imposition of U.S. oil sanctions is now edging closer to reality. Such a move would act as the death knell for Venezuela's oil industry," Stephen Brennock, oil analyst at PVM Oil Associates, said in a research note Wednesday.
President Donald Trump is reportedly considering sanctioning Venezuela's crude industry in a bid to ratchet up pressure on Venezuelan President Nicolas Maduro, Reuters reported Thursday, citing an unnamed U.S. official.
This follows a stark warning from U.S. Secretary of State Rex Tillerson, who said at the start of February that sanctioning Venezuela's oil or prohibiting the crude to be sold in the U.S. was something the White House was continuing to mull over.
A move to directly target Venezuela's oil industry would be a huge blow to Maduro's socialist administration, which is depending almost entirely on crude sales to try and decelerate a deepening economic crisis.
Last year, Venezuela was the fourth largest supplier of crude oil and products to the U.S., according to the Energy Information Administration (EIA).
Brennock said U.S. imposed sanctions on the oil-dependent state's crude industry would force Caracas to offer steep discounts in a desperate search for new buyers and also leave the country reeling with the prospect of supply restrictions of vital diluents. Such diluents are essential in helping to market and transport Venezuela's tar-like heavy crude, he added.
Meanwhile, Maduro is running for another six-year term in a general election next month. The current premier is asking supporters to stick with his brand of "21st century socialism" in order to keep the country on track to recover 70 percent of its lost oil production in the first six months of the year.
In 2017, Venezuela's crude sales to the U.S. slipped below 600,000 — the lowest level of sales to America in almost three decades, according to Reuters.
Citizens of the crisis-torn state are struggling to cope with widespread food shortages, the collapse of its traditional currency and relentless hyperinflation — which the International Monetary Fund (IMF) has forecast to hit 13,000 percent in 2018. At the same time, almost 75 percent of Venezuelans are reportedly suffering from weight loss while unemployment in the country is expected to skyrocket to 32 percent by 2022.
Washington has dismissed Venezuela's upcoming vote as a sham.