How did the Three Seas Crisis reshape oil and gas flows?

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Summaries: The G7 countries agreed last Friday to release 100 million barrels of diesel and crude oil from commercial stocks, after American pressure to calm prices related to the three seas crisis: the Gulf, the Red Sea, and the Black Sea.

Diesel refining revenues in the United States rose to their highest level in history, and American diesel exports rose to record levels, at a time when Russian diesel exports stopped completely.

This coincided with the rise in US production to near-record levels, and the production of the western part of the “Permian Basin” in the state of New Mexico reaching its highest level historically, while the strategic oil reserve declined to the lowest level on record.

In this context, the G7 countries agreed to withdraw 100 million barrels from the strategic reserve, part of which would include oil products, primarily diesel.

The “Group of Seven” countries agreed to release diesel and oil stocks after American pressure. The “G7” countries agreed last Friday to release 100 million barrels of diesel and crude oil from commercial stocks, after American pressure to calm prices related to the crisis of the three seas: the Gulf, the Red Sea and the Black Sea. The release, which is undertaken by the International Energy Agency, begins immediately and continues for four months. Trump had asked Germany and France to withdraw from their stocks, otherwise they would face an American embargo. On the export of diesel, however, the impact of this decision is limited, if any at all, for several reasons, the most important of which are:

First, these quantities were supposed to be withdrawn at the beginning of the crisis, but it turned out that the European countries did not withdraw them and left the burden on the United States and Japan. In other words, these quantities, or most of them, are not in addition to the 400 million barrels that were announced last March.

Secondly, withdrawal is optional and non-binding.

Third, even if these quantities are withdrawn in full, their weekly volume is limited, and therefore their impact on prices remains weak.

Fourth, even if it is completely withdrawn, it comes as compensation for the loss of Chinese petroleum products, after Beijing’s decision to stop exporting this October, and Russia announced the extension of the ban on diesel exports until the end of the same month.

Fifth, it is not clear whether companies will buy these quantities or borrow them from governments, after the sharp decline in withdrawals from the US strategic reserve.

US imports of Venezuelan oil exceed 700 thousand barrels per day. Historically, most of Venezuelan oil was heading to three countries: the United States, China and India. After US sanctions during Trump’s first presidential term in 2018, most of it shifted to China and India, and when President Biden granted an exemption to Chevron, the oil returned to flow towards the United States. Then the flows stopped when the United States arrested Venezuelan President Nicolas Maduro during a special operation on January 3rd, and after the suspension Sanctions Exports rose sharply, especially to the United States.

The effects of the rise in Venezuelan exports on oil markets, during recent months and in the future, are significant even assuming delays, and this increase falls within the American trade wars, energy dominance, and artificial intelligence dominance. Looking at historical data, the following matters become clear:

First, there are opportunities to increase Venezuelan crude exports, especially if they return to their old levels, which exceed three times the current levels.

Secondly, the countries that were greatly affected by US sanctions are Spain, India, and some South American countries.

Third, the countries that have benefited from the increase in Venezuelan oil exports since the Hormuz crisis are the United States, India, and Spain, and the country that has lost Venezuelan oil is China.

Fourth, the increase in US oil imports from Venezuela came at the expense of oil imports from other countries, the most important of which is Iraq, and any increases in the future will be at the expense of Canadian oil.

China no longer receives Venezuelan oil, and the United States has replaced it as the main importer. Looking at the sequence of events, something else becomes clear. The United States accumulated Venezuelan crude in the Gulf of Mexico, and after the closure of Hormuz, it replaced Iraqi imports with this crude. As for American refineries, the two types, Venezuelan and Iraqi, act as substitutes despite their actual differences, and therefore the effect has already appeared. Without Venezuelan crude, the United States would have been more harmed by the Hormuz crisis, and this crude has mitigated the impact of the loss of crude. The Iraqi.

Quoted from "Independent Arabia"