Talks between Venezuelan President Nicolas Maduro's government and his political opposition have been tentatively set for Aug. 13 in Mexico, but analysts are skeptical they can break the country's stalemate and create conditions for eventual US sanctions relief.

Mexico's President Andres Manuel Lopez Obrador announced Aug. 5 that he had accepted the request to host the Norway-mediated talks aimed at resolving a dispute over upcoming elections. He declined to give further details on the meeting but said Mexico hopes for a peaceful resolution to the conflict.

The Maduro government will be represented at the talks by Jorge Rodriguez, minister of communication and information; and Foreign Minister Jorge Arreaza. Opposition leader Juan Guaido will be represented by lawyer Gerardo Blyde and Carlos Vecchio, Guaido's envoy to Washington.

Fernando Ferreira, Rapidan Energy Group's geopolitical risk director, said the Biden administration continues to look for an off-ramp on Venezuela, but he does not expect enough progress in the Mexico negotiations to justify a broad easing of US sanctions on Venezuela's oil sector.

"However, pro-election moderates within the Venezuelan opposition are increasingly gaining ground over hardliners that advocate boycotting the vote," he said. "Support from a prominent opposition leader like Henrique Capriles could give the Biden administration enough cover to start easing some sanctions on Venezuela such as allowing crude-for-fuel swaps."

Even incremental change unlikely

Francisco Monaldi, director of Rice University's Latin American Energy Program, doubts the talks will change the outlook for US sanctions or Venezuela's oil sector.

Monaldi said the Biden administration has so far only made a "largely symbolic gesture" in easing Venezuela sanctions to allow US LPG shipments to meet a critical shortage of fuel for cooking.

This is despite the White House considering a broader easing of sanctions like restarting crude-for-diesel swaps and facing ongoing pressure from some Democrats in Congress to grant humanitarian relief.

"If Maduro agrees to some meaningful steps towards re-institutionalization, perhaps there could be some incremental change, but at this point that does not seem likely," Monaldi said. "The higher oil prices and increased exports also make it less urgent for Maduro."

Production outlook

S&P Global Platts Analytics sees low prospects for US sanctions relief while the Biden White House prioritizes other foreign policy issues and as Maduro's ties with Cuba further complicate the matter for Washington.

Platts Analytics revised down its Venezuelan crude supply forecast by 70,000 b/d for September to end-2022, with production now capped at 600,000 b/d. An eventual fall to mid-2020 levels of 300,000 b/d would be unsurprising absent sanctions relief, it said.

The S&P Global Platts OPEC survey put June production at 550,000 b/d, up 10,000 b/d month on month.

Venezuela pumped 2.4 million b/d in 2015, before sanctions, mismanagement and widespread power outages decimated its oil sector.

The US Treasury Department took modest action July 12 to ease the US sanctions, allowing US LPG producers to export supplies to Venezuela, where propane shortages have forced people to cook on wood stoves.