The U.S. pressure on Venezuela – the military continues to build up its biggest presence in the Caribbean since the Cuban missile crisis - is already having an impact on the country’s oil industry.
The country’s crude exports had spiked in September to over 1 million barrels per day, the highest since February 2019, likely because state-run oil company PDVSA was depleting inventories in anticipation of tightening restrictions.
Venezuelan crude exports are now set to drop in December to 702,000 bpd, the lowest since May, according to data from analytics firm Kpler.
The tightening restrictions have also led to a drop in Venezuelan crude production, which declined by roughly 150,000 bpd in November from a month earlier to 860,000 bpd, following several months of production hovering above 1 million bpd, according to the International Energy Agency.
The drop is partly due to declining exports, meaning output could decline further if exports are constrained as Venezuela's storage fills up.
On top of this, production could be severely curtailed if U.S. restrictions impede imports of naphtha and diluents that are critical for the extraction and processing of Venezuelan oil.
Over two-thirds of Venezuela's oil production is of so-called heavy grade that is tar-like when extracted. Naphtha is used to reduce the oil’s viscosity, enabling it to flow through pipelines for export via terminals and tankers.
Venezuela's heavy crude production is unlikely to stop completely, though, regardless of the rising tensions, because President Donald Trump’s administration has issued Chevron , the second-largest U.S. oil producer, with a special licence to continue operating its joint ventures in Venezuela’s Orinoco belt, which produce around 250,000 bpd.
Chevron exports around 150,000 bpd of crude from Venezuela to the U.S. Gulf Coast, where refineries were built decades ago to process heavy grades from Mexico, Canada and Venezuela.
Putting all of this together, Venezuela's oil production could decline sharply. But the impact on the market will be limited.
