Venezuela has stopped upgrading crude oil as PDVSA finds itself without buyers in the wake of US sanctions, according to sources who spoke to Reuters.
Venezuela hasn’t shut down its upgraders completely, instead, leaving some of them running without producing new oil in order to prevent damage to the facilities.
The upgraders are responsible for upgrading the Latin American nation’s extra-heavy Orinoco oil into lighter-weight grades that are more palatable for foreign buyers—buyers which have now moved on to other suppliers in their efforts to not run afoul of the US sanctions levied against Venezuela as the United States looks to choke off Venezuela’s primary income stream to effect a change in leadership.
The upgraders in question are owned in part by Chevron, Total, Equinor, and Rosneft. Only one crude processing facility remains producing, which blends Orinoco with lighter grades according to Reuters. That facility produces just 70,000 bpd.
One of these joint ventures with Chevron, Petropiar, that processes this extra-heavy crude oil, had to drastically reduce production in April, according to Bloomberg, producing 74,000 bpd in the first two weeks of April, a 44% decline in production for Petropiar in the first two weeks of January. Petropiar has in the past been one of Venezuela’s top producers.
Venezuela’s oil production fell to just 768,000 barrels per day in April 2019.
As Venezuela’s oil exports plummet to new lows, it is finding itself short on storage space, sending yet another bullish signal to the market after oil attacks over the weekend targeted oil tankers near the Strait of Hormuz, drone attacks on an Aramco oil pipeline, and security issues in Iraq that has caused foreign oil companies to take a hard look at the risks associated with staying in country.
WTI was trading up on the flurry of bullish news, offset in part by crude oil inventory builds in the United States according to the EIA and concerns that the escalating China/US trade war will dampen demand for crude.
By Julianne Geiger for Oilprice.com
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