Venezuela's
Oil Exports Are Headed Toward Zero
On May 21st President Donald Trump
signed a new executive order prohibiting certain oil-related transactions with
Venezuela. GlobalData,
a leading data and analytics company, argues that the new sanctions are
symbolic in comparison to the more targeted sanctions previously considered
that would limit exports of Venezuelan crude oil to the U.S.
Adrian
Lara, Oil & Gas Analyst at GlobalData stated:
“Crude
oil production in Venezuela is practically falling at an average of 10% every
quarter and has been since mid-2017.
A
scenario with oil production in the country losing at least another 500,000
barrels per day by the end of the year is not unrealistic. Having full
additional sanctions imposed would certainly send a strong geopolitical message
from the U.S. at the risk of generating more instability in the world supply
markets."
GlobalData
also forecast that Venezuelan crude oil production would fall to around one
million barrels per day by the end of 2018. This is a steep decline from the
three million barrels per day that Venezuela produced in 2011.
Platts reported this week that
Venezuela has already warned eight international customers that it wouldn't
be able to meet its crude oil commitments to them in June.
Venezuela's state oil company PDVSA is contractually
obligated to supply 1.495 million barrels per day to those customers in
June, but only has 694,000 barrels per day available for export.
Impacted
U.S. oil companies reportedly include Chevron, "Conoco" and
Valero. I suspect "Conoco" is really Phillips 66, the refining arm
spun out of ConocoPhillips in 2012.
Venezuela
also reportedly has a severe backlog of crude
deliveries at its main terminals, and this could temporarily halt PDVSA’s
supply contracts if they are not cleared soon. The company has told some
customers it may declare force majeure if they do not accept new delivery
terms, including higher-cost and riskier sea-borne transfers. Brent crude
prices moved higher on the news.
But
if the GlobalData forecast is correct, then the temporary interruption of
Venezuela's exports may be permanent, as they will be plunging toward zero by
the end of the year.
Norb Leahy, Dunwoody
GA Tea Party Leader
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