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Breaking News:

Oil Climbs On Major Crude Draw

Venezuela's Military To Oversee Fuel Rationing

Venezuelans are having their fuel rationed with the rationing overseen by the military, Reuters reported on Sunday as fuel shortages begin to bite deeper.

As local crude oil production continues to fallw and refineries operate much below capacity and as the flow of diluents necessary to produce fuels from Venezuelan superheavy dries up, fuel shortages were a crisis waiting to happen.

Last week, PDVSA documents and shipping data from Reuters showed that imports of fuel and diluents that are necessary to make Venezuela’s extra heavy refinable into fuels have since the start of the month dropped to 86,000 bpd from 225,000 bpd for April as U.S. sanctions bit deeper.

At the same time, according to another PDVSA document cited by S&P Global Platts, crude oil production in the Orinoco Belt has fallen by as much as 77 percent to 169,800 bpd since the start of May.

An additional event that further aggravated the fuel situation was an outage at the Cardon refinery—the second-largest in the country—which stopped operations last Wednesday. The refinery has a capacity of 310,000 bpd of crude oil.

According to the Reuters report from Sunday, the rationing and the long wait times to fill up the tank have sparked additional protests in some cities besides the action led by the opposition. Some people said they had waited for days to fill up.

Even so, Caracas seems to have been spared from the long queues for fuel, at least for the time being. According to Reuters, there were few signs the fuel shortages were creeping closer to the capital.

Meanwhile, after last week talks began between the Maduro government and the Venezuelan opposition in Norway, the Financial Times reported that opposition leader Juan Guaido had hired a debt restructuring veteran probably in anticipation of a regimen change. This is not good news for creditors, according to the FT, as it suggests Guaido, if he takes power, would take a tough approach to lenders.

By Irina Slav for Oilprice.com

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