Venezuela shores up oil exports, steadies output

Exports surpassed estimated crude production of roughly 750,000 b/d, reflecting not only imported feedstock but also a persistent backlog of inventory resulting from bottlenecks caused by US oil sanctions and logistical problems at PdV terminals.

About two-thirds of the exports went to Asia, mainly China with 400,000 b/d. Another 230,000 b/d went to India, mostly for Russian state-controlled Rosneft's Nayara refining system.

The balance flowed to PdV's 50pc-owned Nynas refining system in Sweden and Germany, Venezuela's close political ally Cuba, and Spain as part of a swap for gasoline.

The US market, traditionally accounting for the bulk of Venezuela's oil exports, has been mostly closed off by US sanctions since late January. Before the sanctions were imposed on 28 January, US refiners had been absorbing about 500,000 b/d of Venezuelan crude, the largest share of the total.

The exports last month were comprised of Merey, a 16°API blend of heavy and light grades, as well as diluted crude oil (DCO) and some synthetic Hamaca from inventory.

The data lays bare the near-shutdown of PdV's domestic refining system, leaving virtually all supply for export, partly to pay oil-backed loans. Chinese state-owned banks have extended close to $60bn worth of oil-backed loans to Venezuela's government and PdV since 2007, of which about $16bn remain outstanding, a central bank official said. Rosneft is taking some Venezuelan shipments as loan service as well.

Gasoline and diesel have been scarce in most of the country for weeks, even in Caracas where limited supply is traditionally focused.

Although wellhead crude production is only around a fifth of the volume that the Opec country produced in the 1990s, PdV for now appears to have checked the sharp decline over the past few months.

Output has touched bottom and is starting to rebound slowly thanks mainly to the efforts of PdV's foreign partners, including Chevron, Rosneft, Chinese state-owned CNPC and Spain's Repsol, two upstream officials in PdV's eastern and Orinoco divisions said separately.

"The joint ventures are making a difference in spite of the US sanctions," the eastern division official said.

Both officials warned that stabilized production could be short-lived if the US government declines to renew a sanctions waiver for Chevron that expires on 27 July.

Foreign clients delivering products to Venezuela and loading crude now routinely switch off their transponders to avoid identification that could lead to targeted sanctions.

PdV since May has also been routing shipments through shell companies based in Turkey, and reflagging or renaming some tankers to avoid detection and tracking, particularly involving its trade with Cuba.

Signs that the national oil industry has stabilized for the moment coincide with a lull in political tensions, as delegations from the government and the opposition engage in closely watched negotiations. Talks took place in Barbados this week, and more could follow next week.

The US-backed opposition wants President Nicolas Maduro to step down and new presidential elections in nine months. Maduro has so far refused to give way, but it appears the government is starting to groom a young successor, Miranda state governor Hector Rodriguez, to face off against opposition leader Juan Guaido.