Venezuela’s financial problems have become so acute that it is having trouble paying for the crude oil imports that it needs. Reuters reports that four oil tankers carrying more than 2 million barrels of oil are sitting off the Venezuelan coast because the state-owned oil company has not paid for the cargoes yet.
Venezuela, despite sitting on the world’s largest oil reserves and having membership in OPEC, still needs to import lighter forms of oil in order to dilute its very heavy crude. The state-owned PDVSA, however, is in a state of financial crisis, as is the state itself. According to Reuters, PDVSA has not paid BP for the oil shipments, which have been sent from the U.S., preventing them from docking at Venezuelan ports. Three BP tankers have been sitting at sea for over a month. Related: Will OPEC Use This Strategy To Defeat U.S. Shale?
Separately, other oil tankers have been backed up at Venezuelan waters because of equipment malfunctions at the ports themselves.
In order to pay for the oil from BP, PDVSA proposed an oil swap since it is short on cash. The two sides engaged in negotiations over some sort of swap deal but have been unable to come to an agreement. BP is not the only company that has failed to receive payment. Oil field services giant Schlumberger shut down some operations in Venezuela because it had not been paid for quite some time, as did Halliburton and Petrex. The cash crunch threatens to cut into Venezuela’s oil production, which would exacerbate the economic crisis, accelerating a downward economic spiral. Related: Iranian Oil Is Disguising A Significant Decline In Global Production
The backup of oil tankers at Venezuelan ports adds to the crude congestion around the world. Reuters released some shocking satellite photos of oil tankers anchored at sea outside of key Asian ports in Singapore and Shanghai. The backlog of tankers unable to discharge their cargo suggests that the oil markets are still not balanced, despite the more than 80 percent gain in prices over the past few months. The Middle East in particular is still producing at elevated levels. Iraq, for example, has had trouble exporting all the oil that it is producing, leading to port congestion at its terminal in Basra. The tanker traffic is a sign that global supplies are still exceeding demand.
By Charles Kennedy of Oilprice.com
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