Oil Rises As Reality Dawns Over Venezuela's Export Crisis

Oil rose on Thursday on concerns about a plunge in exports from Venezuela, although surging U.S. production kept gains in check. Venezuela, which faces the threat of U.S. sanctions and is in the midst of an economic crisis, is nearly a month behind delivering crude to customers from its main oil export terminals, according to shipping data, and chronic delays and production declines could breach state-run PDVSA’s supply contracts if backlogs are not cleared soon. Tankers waiting to load more than 24 million barrels of crude, almost as much as state producer PDVSA shipped in April, are sitting off the OPEC member’s main oil port, according to shipping data. “Troubles over supply from Venezuela come at a time when OPEC is considering easing supply cuts which have been in place since 2017 and were implemented to support the price,” London Capital Group head of research Jasper Lawler said. “The big question for oil is whether or not OPEC decides to ease the production cuts, with the meeting still some two weeks away, oil traders could be in for an increased bout of volatility.”

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2 minutes ago, rainman said:

... Tankers waiting to load more than 24 million barrels of crude, almost as much as state producer PDVSA shipped in April, are sitting off the OPEC member’s main oil port, according to shipping data....

They have vast reserves of oil but cannot even deliver it properly...Maduro's reality

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PDVSA is contractually obligated to supply 1.495 million b/d to those customers in June, but only has 694,000 b/d available for export...They basically sold future cotracts, brent, and will fail delivery. 

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Venezuela is world headlines of this week. Can Maduro's Removal be Far Off?
 - production plunges to 1/3rd of daily contracted volume 
- ports unable to load-out crude
Maybe armed forces can change the situation and withdraw support for regime

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Venezuela’s crude oil exports in the first five months of 2018 were 27% lower than in the same period of 2017. Financial disaster.

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1 hour ago, pinto said:

Maybe armed forces can change the situation and withdraw support for regime

^ This.  If the military withdraws support, Maduro's goose is cooked.  

Pretty sure that's one reason why Maduro put a military general with no oil & gas experience in charge of PDSVA.

 

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They are sitting on some of the best reserves found to date; seems that at some point they would come to the table and solve their issues.  Time for Maduro to go..

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46 minutes ago, Outlaw Jackie said:

They are sitting on some of the best reserves found to date; seems that at some point they would come to the table and solve their issues.  Time for Maduro to go..

There is no room for Maduro at that table.

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Surprisingly i still see how world oil prices and markets react substantially to whats happening with Venezuela, which has a crumbling oil production and will be a net importer in my sincere belief since Maduro said and reaffirmed Quevedo in his post as PDVSA head just 2 days ago in a meeting with oil workers, which by the way was really disgusting and lamentable all the spectacle... really dumb. I dont really think venezuela is important now to cause that much impact on oil markets, not now, maybe when it was producing 4 million barrels a day, but definitely not now in its sad situation, having had some previous experience there. 

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(edited)

Frankly I am surprised that anyone is surprised.  You need money to produce oil before you can sell it.  Venezuela can't afford to keep up it oil infrastructure and unless they get some type of bail out (which is unlikely without a change of government) their production will keep falling. 

This is all the more reason for Canada to build the Trans Mountain pipeline expansion and for the US to get going on the Keystone XL.  Heavy oil from Venezuela needs to be replaced and Alberta, Canada has lots of it but does not have the ability to ship it because of environmentalist obstructionism.

If you have to pay too much for gasoline blame environmentalism in Canada and socialism in Venezuela.

Edited by PeterfromCalgary
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11 hours ago, Tom Kirkman said:

^ This.  If the military withdraws support, Maduro's goose is cooked.  

Pretty sure that's one reason why Maduro put a military general with no oil & gas experience in charge of PDSVA.

 

Once Moduro can no longer feed the military they will revolt.  Unfortunately, a lot of innocent Venezuelans will suffer a lot before then because of Moduro's stupidity and cruelty.

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4 minutes ago, PeterfromCalgary said:

Once Maduro can no longer feed the military they will revolt.  Unfortunately, a lot of innocent Venezuelans will suffer a lot before then because of Maduro's stupidity and cruelty.

Agreed.  It seems pretty close to the breaking point already.  Citizens fleeing the country in droves.

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11 hours ago, Outlaw Jackie said:

They are sitting on some of the best reserves found to date; seems that at some point they would come to the table and solve their issues.  Time for Maduro to go..

How to fix it though? The entire oil industry infrastructure is falling apart, because they've done practically no maintenance since Chavez took over. It would take 10's of Billions of $$ to bring it back to life, and that's on top of the 10's of Billions of $$ they owe to oil field service companies and joint venture partners, and that's on top of the $30 Billion or so they still owe China.

Foreign companies wold be leery of being invited to fix the problem knowing that their assets could just be confiscated again. On top of the crumbling infrastructure, there has been a massive exodus of oil industry professionals that know how to operate and fix these things. It's not only oil, but also the power and water industry that is teetering on collapse. Virtually nothing is made in Venezuela anymore, as the dictatorship confiscated any money making industries and put most of the others out of business by telling them they had to sell their goods for below the value they paid for them. 

It's going to take decades to fix the country once Maduro and the Chavistas are finally kicked out of power. I'm not even sure the country can be fixed at this point, things are so far gone that there is almost nothing left to fix and no money to even attempt to do it.

The Bolivar continues it's free fall, and is now down to about Bs 2,000,000 for $1 US dollar, which is pretty bad when you consider it was at Bs 1,000,000 only about a week ago. Not much survives that rate of inflation for long. They also have a lot of bond payments coming up this year, which I don't see them making either. Honestly I'd be surprised if Maduro survives to the end of the year.

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so...

Venezuela runs out of port capacity for loading what little oil it has. over seventy tankers sitting idle. one tanker has been waiting since February.

Venezuela offer its customers the option of ship to ship transfers instead, threatening nicely to declare a force majuere if it's new terms aren't accepted. 

new terms add $1 per barrel to the cost because it's more expensive for ship to ship. 

oil price rise by $1 barrel on fears of Venezuela's dire straits.

balance to the oil universe is restored. 

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