Venezuela’s supply of Russian naphtha is at risk of crumbling, threatening the South American country’s crude exports, after U.S. President Donald Trump ordered a blockade of sanctioned tankers heading to or departing from Venezuela.
Russian exports of naphtha to Venezuela have soared in recent months and Venezuela relies on naphtha and other fuels to serve as diluents for its extra heavy crude. Shipments from other sources stopped and Venezuela turned to Russia for naphtha supply in the middle of this year.
But Russian cargoes are transported on blacklisted tankers with sanctioned owners and operators—becoming targets of the U.S. blockade.
Russian naphtha cargoes en route Venezuela may have to divert to other destinations, putting Venezuela’s ability to dilute and export its heavy crude at risk, traders told Reuters on Wednesday.
At least one tanker with 32,000 metric tons of Russian naphtha was traveling to Venezuela last week, but it has made a U-turn at the end of the week and is now en route to Europe with the cargo still on board, according to data from LSEG cited by Reuters.
President Trump’s announcement of a blockade on sanctioned Venezuelan tankers pushed oil prices up by more than 2% early on Wednesday.
In the worst-case scenario for Venezuela’s crude supply, with additional restrictions and a shortage of diluents to help the heavy crude flow for exports, Venezuela could lose up to 500,000 barrels per day (bpd) of its oil production, according to Reuters estimates.
Venezuela’s supply risk supported oil prices early on Wednesday, although hopes of peace in Ukraine capped gains.
Venezuela is estimated to have exported about 600,000 bpd of oil last month, ING’s commodities strategists Warren Patterson and Ewa Manthey said in a note on Wednesday.
“It’s likely that these volumes will fall given the latest developments. The bulk of this oil is shipped to China,” the strategists added.
By Tsvetana Paraskova for Oilprice.com
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