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The Nickel Supply Squeeze Could Send Prices Even Higher

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Venezuela Ups Domestic Oil Refining, Hurting Crude Exports

Venezuela's PDVSA is using more of its domestic output of medium and light crude oil grades for refining, reducing their availability as diluents for its heavy export grades, Reuters has reported, citing sources familiar with the matter.

The increase in local refining has been prompted by fuel supply shortages that have led to rationing, queues, and additional disgruntlement among the Venezuelan population.

"They need to distribute the production between the refineries and blending in the [Orinoco] Belt," one of the Reuters sources said. "There is not enough for both."

The source added PDVSA is producing around 160,000 bpd of light crude.

The fuel shortages got so bad amid the deepening crisis at its state oil firm that Venezuelans started stealing crude oil from idle oilfields and processing it at home to make low-quality gasoline, workers at PDVSA, and people with knowledge of the events told Reuters last year.

At the idled oilfield La Concepcion in western Venezuela, for example, people made holes in the pipelines that were used to transport the crude to storage tanks. PDVSA employees are ready to accept bribes not to report such thefts, as their meager salaries quickly evaporate with hyperinflation.

As a result, PDVSA started using more of the lighter grades it produces to turn into fuels, which it is now selling in U.S. dollars, Reuters notes in its report, generating substantial revenues for the government and offsetting at least partially lower exports of heavy crude.

Venezuela's flagship Merey 16 export blend contains extra heavy crude from the Orinoco Belt, mixed with lighter crudes to make it liquid enough for exporting.

Even with the increased refining, however, Venezuela's crude oil exports have been surprisingly high lately. According to two oil export tracking providers—energy analytics firm OilX and TankerTrackers—Venezuela exported about 500,000 bpd of crude in February this year. That's much higher than the 420,000 bpd in exports Bloomberg reported on last month.

By Irina Slav for Oilprice.com

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