The move could help raise the global supply of oil and tamp down energy price hikes as the Biden administration heads for mid-term elections in November. The Journal report surfaced on the same day of a large output cut announced by oil producing alliance OPEC+ to shore up crude that prices had been beaten down for since June.
The move could pave the way for a reopening of US and European markets to oil exports from Venezuela, the Journal reported on Wednesday, citing multiple people familiar with the proposal.
The report said in exchange for "significant sanctions relief," the government of Venezuelan President Nicolas Maduro would resume long-suspended talks with the country’s opposition to discuss conditions needed to hold free and fair presidential elections in 2024.
The United States, Venezuela’s government and some Venezuelan opposition figures have also worked out a deal that would free up hundreds of millions of dollars in Venezuelan state funds frozen in American banks to pay for imports of food, medicine and equipment for the country’s battered electricity grid and municipal water systems.
For the Biden administration, the bigger benefit could be lower global prices of oil.
The report said the deal is contingent on the Maduro government approving it. If it goes through and Chevron, along with US oil service companies, are allowed to work in Venezuela again, it would put only a limited amount of new oil on the world market in the short term.
Francisco Monaldi, a Latin America energy expert at Houston-based Rice University, told the Journal that engaging Venezuela, which sits atop some of the world’s largest oil reserves, could serve as a longer-term strategy for the United States and Europe in their bid to secure new energy sources amid the prolonged Ukraine conflict that has upended supply and sharply boosted prices from year-ago levels.
"If [oil] prices come down, this all could change," Monaldi said. "But for now, this is their obsession."
Oil prices jumped for a third day in a row after producer group OPEC+ announced a 2-million-barrel per day cut from November that it said will be a substantial reduction on its production. But media reports from last month showed the oil producing alliance being some 3.583 million barrels short of its daily target for August, Prior to that, OPEC+ was short on its July production target by 2.892 million barrels daily.
New York-traded West Texas Intermediate, or WTI, crude settled up $1.24, or 1.4%, at $87.76 per barrel. WTI had fallen 12.5% in September and 24% in the third quarter.
Brent, the London-traded global benchmark for oil, settled up $1.57, or 1.7%, at $93.37 per barrel. Brent was down 11% last month and finished the July-Sept period lower by 22%.
President Joe Biden, in a statement issued by the White House, indicated that he would respond to the OPEC+ move by releasing even more oil from the US Strategic Petroleum Reserve, or SPR. The Biden administration has already drawn SPR stockpiles down to their lowest since 1984 and seems game to do more, in a tit-for-tat with OPEC+.