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Venezuela’s oil production could feasibly fall to just 500,000 barrels per day by year’s end, according to the US State Department’s Special Envoy to Venezuela in a Wednesday hearing on the crisis-stricken Latin American nation on Wednesday.

 The cause for the expected production declines, said Rep. Elliot Abrams, was the impact of US sanctions on Venezuela’s state-run oil company, PDVSA.  

The crisis in Venezuela, of which its floundering oil industry is merely one part,  is “entirely manmade”, according to House Committee on Foreign Affairs Chairman Eliot L. Engel, who is also the Co-Chair of the House Oil and National Security Caucus, a champion for US energy independence, and serves on the Commission for Human Rights, who today did not mince words when he laid blame for the Venezuelan  disaster squarely on Nicolas Maduro’s and Hugo Chavez’s doorstep. Two leaders, Engel said, who “have driven the country off the edge of the cliff.”

In his opening remarks as chairman, Engel went on to definitively dispel the notion that US military intervention in Venezuela could possibly be used in the future, despite what he referred to as President Donald Trump’s “sabre rattling” on the issue, stressing that such action would require Congressional approval, which would never be given.

Despite that preface for Wednesday’s hearing, a heated exchange between Rep. Elliot Abrams and Rep. Ilhar Omar sprung up, with Rep. Omar asking of Abrams, “Yes or no, would you support an armed faction within Venezuela that engages in war crimes, crimes against humanity or geocide if you believe they were serving US interest, as you did in Guatemala, El Salvador, and Nicaragua?” To which Abrams refused to reply.

Related: Oil Rises Despite Rising Oil, Product Inventories

Venezuela’s oil production—which accounts for 95% of the country’s export revenues—is but a shadow of its former glory days of 3 million barrels per day as it was in 1997. By 2017 its production had fallen to 2 million bpd, and by this time last year, Venezuela’s production had fallen again to 1.5 million bpd. 

According to OPEC’s latest monthly oil market report, Venezuela’s production last month fell to 1.1 million bpd.

Depending on what point is being made, one could believe that Maduro and Chavez are responsible for the inexorable production decline in Venezuela, who has hundreds of billions of barrels in oil reserves. One could also believe the US back patting that suggests its new round of US sanctions levied in January on Venezuela is the cause of the reduced oil output by tying the hands of its customers, and by holding back shipments of the essential diluent that Venezuela needs to keep the oil flowing.

Should its oil output indeed sink to 500,000 bpd by the end of this year, customers of Venezuela’s heavy oil, including India and the United States, may find it hard to purchase a suitable heavy substitute, as all oil is not equal.

By Julianne Geiger for Oilprice.com

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