Following the U.S. sanctions, Venezuela’s oil inventories have swelled to a five-year high, The Wall Street Journal reported on Thursday, citing satellite data—a sign that Venezuelan oil buyers are fleeing and the country sitting on top of the world’s largest crude resources is struggling to sell its oil.
At the end of January, the U.S. imposed sanctions on PDVSA to “help prevent further diverting of Venezuela’s assets by Maduro and preserve these assets for the people of Venezuela. The path to sanctions relief for PdVSA is through the expeditious transfer of control to the Interim President or a subsequent, democratically elected government,” Secretary of the Treasury Steven T. Mnuchin said.
The sanctions block all payments to PDVSA accounts, and buyers of Venezuelan crude are directed to deposit payments in a separate account, to which PDVSA doesn’t have access.
A week after the U.S. sanctions were announced, people familiar with the matter told The Journal that Venezuelan oil exports are sharply falling while oil storage tanks in the country are filling up, as Nicolas Maduro’s regime is struggling to find new buyers for Venezuela’s oil.
The U.S. sanctions not only cut off Venezuela’s exports to the United States—its key outlet market until a few weeks ago—but also ban U.S. exports of naphtha to Venezuela, which the country uses to dilute its thick heavy oil to make it flow. Analysts expect that a shortage of diluents could accelerate from this month the already steadily declining Venezuelan oil production and exports.
Last week, U.S. National Security Advisor John Bolton warned countries and companies against buying crude oil from Venezuela, after the Latin American country’s Oil Minister Manuel Quevedo said during a surprise visit to India that Venezuela wants to sell more oil to the fast-growing Indian market.
According to energy research and consulting firm Rystad Energy, in the low case scenario, where the status-quo continues and Venezuela is unable to offset the effects of U.S. sanctions and secure new financing, the country could see its crude oil production decline by an additional 20-percent in 2019, dropping to about 800,000 bpd, before sliding to 680,000 bpd in 2020.
By Tsvetana Paraskova for Oilprice.com