US Pressure on Venezuela Oil Won’t Trigger Global Shortage: Bousso

The United States has escalated its efforts to curb Venezuela’s oil exports, intensifying pressure on President Nicolas Maduro’s administration. As part of this strategy, the U.S. Coast Guard recently seized a supertanker carrying Venezuelan crude aimed for Cuba. This marks a significant step in Washington’s ongoing campaign against Caracas.

Impact of U.S. Pressure on Venezuela Oil

Despite the U.S. measures, experts suggest that the global oil market will not experience significant shortages. The U.S. military is increasing its presence in the Caribbean, reminiscent of the Cuban Missile Crisis, in a bid to intercept vessels transporting Venezuelan oil. Recently imposed sanctions target Maduro’s family, along with six crude tankers and associated shipping companies.

Current State of Venezuelan Oil Exports

• Venezuelan crude exports peaked in September at over 1 million barrels per day (bpd).
• Forecasts predict a decline to 702,000 bpd in December, the lowest output since May.
• In November, crude production dropped approximately 150,000 bpd to 860,000 bpd from October’s levels.

This decline is attributed to reduced exports and rising international trading risks, which are pushing Asian buyers to seek deeper discounts on Venezuelan crude. The International Energy Agency has recorded this significant downturn in output.

Challenges in Production and Imports

The restrictions on Venezuelan oil have a considerable impact on production levels. Over two-thirds of the country’s oil is classified as heavy grade, requiring naphtha and diluents for efficient extraction and transportation. However, Venezuelan refineries have faced years of neglect, leading to high dependency on imported naphtha.

• Imports of naphtha are projected to decline to 39,000 bpd in December, down significantly from 89,000 bpd in October.
• This shortage poses a risk to overall oil production stability in Venezuela.

U.S. Licenses and Future Prospects

Even amidst these challenges, it is essential to note that Venezuela’s heavy crude production is expected to continue. Chevron, a major U.S. oil producer, has been granted a special license to maintain operations in Venezuela’s Orinoco belt, contributing around 250,000 bpd to production levels.

According to estimates, Venezuela’s total oil production could decrease by 300,000 to 500,000 bpd due to these restrictions. Nonetheless, the overall effect on the global oil market is anticipated to be minimal due to current high supply levels.

Global Oil Market Outlook

In the face of a potential supply deficit from Venezuela, increased output from Canada and the Gulf of Mexico is expected to compensate for any losses. The global oil market, equipped with a substantial surplus, is likely to remain stable, even as tensions in Venezuela escalate.

The future of Venezuela’s oil industry largely hinges on political developments. Should a new government emerge that favors lifting sanctions, production could see a swift rebound, tapping into the world’s largest oil reserves estimated at 303 billion barrels.