Venezuela may be forced to start shutting in oil production as it runs out of storage space amid the U.S. tanker blockade, Bloomberg has reported, citing unnamed sources.
According to the sources, the biggest oil storage hub and tankers at Venezuelan ports could fill up within 10 days, prompting production curbs.
Earlier this week, Reuters reported that some 11 million barrels of Venezuelan crude were stuck at sea amid the U.S. escalation, prompting deeper discounts and demands from buyers for changes in the spot contracts, under which the oil was being sold.
Meanwhile, Venezuela’s production of crude oil is already sliding. The International Energy Agency estimated Venezuela’s oil supply at 860,000 barrels per day in November, down from 1.01 million bpd in October and a similarly above 1-million-bpd level in September, when Venezuelan crude oil output hit its highest since February 2019.
Further declines in Venezuela’s oil supply are expected in December, following the U.S. actions in Caribbean waters. After seizing one tanker carrying Venezuelan crude early this month, the U.S. is prepared to seize more tankers, Reuters reported last week, citing unnamed sources who said there was already a list of vessels targeted for seizure.
Further disruption for Venezuela’s oil industry comes from the impact of the tanker blockade on its supply of Russian naphtha, which PDVSA uses to dilute its heavy crude. At least one tanker with 32,000 metric tons of Russian naphtha was traveling to Venezuela last week, but it 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 that Reuters cited earlier this week.
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 of its oil production, according to Reuters estimates.
By Charles Kennedy for Oilprice.com
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