Venezuela may shut oil wells as storage fills amid US blockade

Venezuela could soon be forced to shut in oil production as storage capacity runs out due to a US blockade on oil tankers, Bloomberg reported, citing unnamed sources.

According to the report, the country’s main oil storage hub and tankers at its ports could reach capacity within about 10 days, potentially forcing production cuts.

Earlier this week, Reuters reported that around 11 million barrels of Venezuelan crude were stranded at sea following the escalation of US actions, leading to steeper discounts and demands from buyers to revise spot contract terms.

Venezuela’s oil output has already been declining. The International Energy Agency estimated production at 860,000 barrels per day in November, down from 1.01 million bpd in October and above 1 million bpd in September, the highest level since February 2019.

Further declines are expected in December as US actions in Caribbean waters continue. After seizing a tanker carrying Venezuelan crude earlier this month, the United States is reportedly preparing to seize additional vessels, with a list of targeted tankers already drawn up, according to Reuters.

The blockade is also disrupting Venezuela’s access to Russian naphtha, which state oil company PDVSA uses to dilute its heavy crude for export. Data cited by Reuters showed that at least one tanker carrying 32,000 metric tons of Russian naphtha bound for Venezuela last week reversed course and is now heading to Europe.

In a worst-case scenario involving tighter restrictions and shortages of diluents, Venezuela could lose as much as 500,000 barrels per day of oil production, Reuters estimates.