Short-term Premium in The Crude Oil Market

 As the country with the largest proven oil reserves in the world, the sudden change in the situation in Venezuela has quickly drawn the attention of the global oil market Industry insiders believe that given the current near-saturation of global crude oil storage capacity and the impact of sanctions, Venezuela's current crude oil exports are relatively limited, and this incident may only bring a short-term premium to the crude oil market.

 The previous oil tanker blockade imposed by the United States has cut off Venezuela's heavy crude oil exports and the import of diluents (naphtha), leading to a reduction in production in the Orinoco heavy oil belt by about 25%, with output dropping to approximately 500,000 barrels per day With Maduro being forcibly controlled by the United States, Venezuela faces a power vacuum in the short term, and its ports and logistics systems may be disrupted.

 The obstruction in the trade sector has further exacerbated regional supply shortages. The blockade of oil tankers, combined with payment and insurance restrictions, has essentially shut down Venezuela's crude oil export channels. The resulting inventory buildup has forced the closure of some oil wells, and global heavy crude and ultra-heavy crude oil production may decrease by 400,000 to 500,000 barrels per day. In such a situation, the geopolitical premium for heavy crude oil may be quickly pushed up.

 As for the long-term impact, the interviewees stated that the supply elasticity of Venezuelan crude oil depends on changes in the situation. If a pro-US regime comes to power, US sanctions will gradually be relaxed, and the entry of US oil companies' technology and funds will boost Venezuela's crude oil production, which is expected to recover to 1.2 million to 1.5 million barrels per day within 6 to 12 months; if the situation in Venezuela continues to be unstable, production may drop below 500,000 barrels per day. The refining sector is also facing polarization; in the short term, due to management chaos and raw material shortages, refinery capacity may decline again; in the medium and long term, if foreign investment intervenes, Venezuela's deep processing capabilities are likely to be restored.