Venezuela's oil exports to the US fading fast

Collapsing shipments point to deep pain in the country's oil industry

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For all the trials and tribulations in Venezuela-US relations over the years, the steady stream of oil tankers ferrying crude from Venezuela's Caribbean ports into America's Gulf Coast has been a reliable bond binding the countries together. Those tankers are increasingly scarce these days.

Venezuela's crude exports to the US are having their worst month in 30 years as the country's oil output continues to suffer under a spiraling economic and political crisis.

Shipments to the US averaged just 394,000 b/d in the first three weeks of January, the lowest monthly pace since 1988, lower even than the bottom of the crippling 2002-03 oil strikes, according to data from the Energy Information Administration.

The falling exports aren't a surprise considering Venezuela saw a steep drop in December output to 1.6m barrels a day, another multi-decade low, and a 30% decline over the course of 2017, according to figures Venezuela reports to Opec. Still, it adds another discomfiting data point to the unprecedented collapse in the country's oil industry.

The US export figure is particularly vital to Venezuela's finances, not to mention the bondholders hoping Caracas is able to keep up on its debt payments. The US is by far the most important cash-generating market for state oil company PdV, with India's refiners being the only other significant cash buyers for Venezuelan oil. The rest goes to the domestic market where refined products are virtually given away, or to Russia and China to pay back oil-for-loan deals, or to Cuba and the rest of Caribbean on sweetheart terms meant to earn Venezuela diplomatic sway over the region's goings on.

Industry health check

The export data is also the most consistent barometer of the health for the Venezuelan oil industry. The country's own reported production figures are widely disbelieved in the market after years of political meddling. Even the recent steep collapse reported by Venezuela raises questions. Its own reported figures have fallen much faster than secondary sources have reported—590,000b/d compared to 289,000b/d over 2017—and recently fell below the secondary source figure for the first time.

The newly appointed head of PdV and energy minister, major general Manuel Quevedo, added to the confusion when he told Platts at the Opec confab in Oman this week that production has fallen to less than 1.5m b/d. He then went on to say that production has recovered to 1.9m b/d, and a recovery to nearly 2.5m b/d is in sight. That would seem preposterous given the state of the industry, but needless to say anything close to a 1m b/d recovery in Venezuela's output would lay waste to the oil recovery.

Venezuela's export collapse into the US has opened the door to other rival heavy oil suppliers, though surging US output means they're all competing for a slice of a smaller pie.

Canada has taken up much of the slack, with its exports into the Gulf Coast surging in recent years. Venezuela has also ceded market share in recent months to regional competitors Mexico and Colombia, as well as Iraq. Venezuela's collapse has also no doubt helped keep the long-delayed Keystone XL pipeline, which would be a direct competitor in the Gulf Coast market, alive in spite of its many struggles.

Citgo's roughly 0.75m b/d of refining capacity remains a formidable beachhead in the US market for Venezuela, and would make it easier to retake market share should output ever recover. But for now, that looks a long way off.

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