Venezuelan crude exports faced with 24m barrel backlog as export bottleneck continues

 
Torjus Roberg
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Venezuela's oil exports are rapidly declining and are expected to continue to decrease (Source: Getty)

The struggling Venezuelan oil production is nearly a month behind in crude shipping as tankers waiting to transport over 24m barrels still sit in Venezuela's main port.

PDVSA, the Venezuelan state-run oil company, has warned that if the tanker bottleneck causing a stagnation in exports continues, it could mean that deliveries to some of the world's largest refiners could be severely delayed.

Venezuela, a member of the Organisation of the Petroleum Exporting Countries (Opec), has for months suffered from declining oil output due to lack of investment in the sector and with US President Donald Trump imposing sanctions on the country following the re-appointment of President Nicolas Maduro.

Now the backlog is so big that PDVSA has told customers it may declare force majeure, meaning it may be temporarily unable to fulfil contracts.

Read more: Venezuela sanctions and high oil demand push prices back up to $80

In April, PDVSA maintained a shipping rate of 1.49m barrels per day, 30 per cent less than the agreed upon 665,000 barrels per day, according to documents seen by Reuters.

Some customers waiting for delivery of crude by the 80 tankers currently floating in Venezuelan ports include Chevron, Valero Energy, Nayara Energy and CNPC.

Venezuela's crude exports fell six per cent in May after legal action from US oil company ConocoPhillips to seize PDVSA oil assets in four Caribbean islands.

The halt in exports may cause oil prices to increase again after seeing a decline when Opec announced its intention to resupply the market in late May. As of 4.20pm today, Brent crude had increased by almost two per cent to $76.74 (£57).

According to Ashley Kelty, oil and gas research analyst at Cantor Fitzgerald, the Venezuelan crude export will most likely collapse completely eventually as the industry has reached such low levels that the chances of turning it around are small.

Because of the continued predicted decline, Kelty believes that oil prices will take an upward turn eventually as the relief of around 1m barrels per day from Opec will not be sufficient to plug the hole left by Venezuela, Iran and eventually the US as it will not be able to keep up current production.

Declining output from Venezuela and a supply hole in the market caused by missing Iranian oil after the US sanctions announcement caused the oil prices to surge in May, pushing Brent crude up to $80 (£59) per barrel, a price not seen since November 2014.

Read more: Johnson: Allies may "tighten the economic screw" on Venezuela

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