US Pressure on Venezuela Oil Unlikely to Cause Global Shortage Says Bousso

The United States’ recent actions against Venezuela’s oil exports aim to tighten its grip on the country’s oil production. Although these measures could significantly impact Venezuela’s economy, they are unlikely to cause a global oil shortage.

Current U.S. Actions and Venezuela’s Economic Challenges

Last week, the U.S. Coast Guard seized a supertanker in mid-ocean that was carrying Venezuelan crude to Cuba. This incident marks a notable escalation in the U.S. campaign against the Maduro administration. The military’s increased presence in the Caribbean aims to prevent the shipment of Venezuelan oil via unregulated vessels, often referred to as the “dark fleet”.

• The U.S. has imposed sanctions on President Nicolás Maduro’s family, six crude tankers, and associated shipping companies.
• Washington is preparing to intercept more tankers transporting Venezuelan oil.

Impact on Venezuela’s Oil Export Levels

Despite these actions, the global market is expected to remain stable. Venezuela’s crude exports experienced a brief increase, exceeding 1 million barrels per day (bpd) in September. However, this figure is projected to decline to 702,000 bpd in December, marking the lowest level since May.

The International Energy Agency indicates that Venezuela’s production dipped to 860,000 bpd in November, down from over 1 million bpd for several months. A significant decline in exports is anticipated due to rising restrictions, impacting the country’s oil storage capabilities.

Concerns Over Naphtha and Heavy Crude Production

Venezuela’s heavy crude production faces potential disruptions due to diminishing imports of critical components like naphtha. Naphtha is essential for processing heavy-grade oil, which constitutes over two-thirds of Venezuela’s production.

• Projected naphtha imports for December are at 39,000 bpd, a decline from 54,000 bpd in November.
• Declining imports pose a high risk to Venezuelan oil production capabilities.

Long-term Projections and Global Implications

Despite the tightening restrictions, experts suggest that Venezuela’s heavy crude production is unlikely to cease entirely. For instance, Chevron has been issued a special license to continue operating its ventures in Venezuela’s Orinoco belt, generating about 250,000 bpd.

Overall, estimates suggest a potential production decline of 300,000 to 500,000 bpd due to reduced exports and increased restrictions. However, this decrease may have minimal impact on the global oil market, which is currently well-supplied and likely to mitigate shortfalls with increased output from Canada and the Gulf of Mexico.

In conclusion, while U.S. pressure increases on Venezuela’s oil output, the global market appears resilient, with important contingencies in place to counteract potential shortages.