Due to the U.S. blockade on Venezuelan oil, the country's storage capacity is nearly full, forcing the state-owned oil company to cut production. Meanwhile, the political crisis intensified the chaos in Venezuela after President Maduro was detained by the U.S. last Saturday.
U.S. President Donald Trump said on Saturday that the full oil embargo against Venezuela had taken effect as part of the U.S. detention of Maduro and its intervention in the country's government transition.
Chevron, which had been exempt from U.S. sanctions on oil shipments, has also begun to halt transporting Venezuelan oil. Shipping data released last Sunday showed that Chevron's oil tanker operations ceased starting last Thursday, signaling another disruption in Venezuela's oil activities.
Industry insiders also pointed out that as onshore crude oil inventories continue to rise, the diluents used by Venezuela's state-owned oil company to blend heavy crude are about to run out, and the company's measures include shutting down oil fields or clusters of wells.
Industry insiders added that Venezuela's state-owned oil company has requested oil firms, including joint ventures with China National Petroleum Corporation such as Petrolera Sinovensa, and Chevron's ventures like Petropiar and Petroboscan, as well as the wholly-owned Petromonagas, to cut production.
Impact of production cuts
Due to excessive backlogs of heavy crude oil and a shortage of diluents, workers at Sinovensa reportedly disconnected the pipelines of up to 10 oil wells at the request of Venezuela's state oil company last Sunday. However, these wells can be quickly reconnected in the future.
Industry insiders pointed out that workers at Petromonagas have been reducing production since late last week until the diluent supply is restored.
Chevron has not yet cut oil production, as it still has some storage capacity and tankers have not stopped loading. However, another industry insider noted that Chevron's vessels have not left Venezuelan waters since last Thursday, and with limited storage capacity, this could eventually lead to production cuts.
A reduction in crude oil production could trigger a chain reaction affecting other sectors such as Venezuela's refining and domestic fuel supply, which is bad news for the interim government that relies on fiscal revenue to maintain its rule and ensure domestic stability.
According to preliminary data, Venezuela's daily oil production in November last year was about 1.1 million barrels, with exports that month reaching 950,000 barrels per day, but U.S. measures reduced last month's exports to approximately 500,000 barrels per day.
