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Oil inventories at the port of Jose have reached 11.8 million barrels, which is the highest since August, Reuters reports, citing a PDVSA document. The port is the largest export hub for Venezuelan oil.
The reason inventories are on the rise is, once again, U.S. sanctions against Caracas. These have made buyers reluctant to risk importing Venezuelan oil now that a grace period is expiring for several commodity trading companies that Washington had allowed to continue buying Venezuelan oil for a while. The companies include Spain’s Repsol and Italy’s Eni, as well as Thai Tipco Asphalt.
PDVSA’s problem, however, is that rising inventories are filling up its available storage space. According to Reuters, the 11.8 million barrels were an increase from just 5.6 million barrels a month ago and there was just 3 million barrels of space left.
If inventories continue to build, PDVSA would have to start reducing production for lack of storage space. This happens soon after the company managed to boost its production at some of its joint ventures.
Just a few days ago, Bloomberg reported PDVSA’s crude oil inventories at the port of Jose had climbed to 10.6 million bpd in the three weeks to October 23, even after Eni, Repsol, and India’s Reliance bought 9.7 million barrels of crude from PDVSA during the period.
Venezuela’s exports have significantly slumped since the U.S. imposed sanctions on its crude oil exports in early 2019, essentially prohibiting U.S. refiners from buying Venezuelan crude, which was a large part of the imports of crude for U.S. Gulf Coast refiners.
Despite the sanctions, the country exported some 690,000 bpd in September—the highest daily export rate since April. It has switched to crude-for-diesel swap deals, which are still allowed for humanitarian reasons. However, Bloomberg noted last Friday, Washington is looking for ways to cut off this lifeline to the Maduro government as well.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.
And yet, Venezuelan crude oil exports have been on the rise for the last four months hitting 690,000 barrels a day (b/d) in September. Venezuela’s oil production also have been on the rise averaging 542,750 b/d in the first eight months of 2020.
Moreover, whatever oil Venezuela produces beyond its storage capacity it can always ship to China and Russia in payment for their outstanding loans.
The truth of the matter is that US sanctions have so far failed miserably to effect a regime change by installing its puppet Juan Guaido in order to help the United States get its hands on Venezuela’s oil wealth, the largest in the world and also failed to cripple its oil industry.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London