VENEZUELA

Holding more oil than Saudi Arabia, Venezuela has fallen behind three other Latin American countries as years of mismanagement and lack of investments take their toll.

The OPEC founder with oil reserves of 302.3 Bbbl, produced 740,000 bopd in March. Colombia, with 1.96 Bbbl. of oil reserves, under 1% of Venezuela’s, produced 884,815 bbl.

Once the main source of crude for U.S. Gulf refiners, oil-rich Venezuela sees its share at zero after the U.S. imposed a de facto ban on imports from Petroleos de Venezuela SA in January. Colombian oil producers fill the void, as refiners owned by Chevron Corp, Valero Energy Corp and even Citgo Petroleum Corp — formerly controlled by the Maduro regime and now controlled by interim president Juan Guaido — gorge on Colombia crude. Oil production in Venezuela has been falling over the past decade, plagued by chronic power outages and lack of chemicals. The largest producer of oil in Latin America, is now behind Brazil, Mexico and Colombia, producing 1.354 MMbbl a day in 2018, the lowest in 69 years.

As U.S. sanctions take hold, kilometres-long lines for fuel grow in the second-largest city, Maracaibo. PDVSA is producing at 10 to 15 per cent of its capacity as Venezuela, with the world’s largest oil reserves, lacks cash to import key ingredients to maintain production in decaying refineries. Sanctions isolate the government from Houston-based PDVSA subsidiary Citgo, depriving officials of an estimated $11 billion US in hard currency from exports this year, cash flow bankrolling the “dictatorship.” Sanctions inhibit access to diluents to thin tar-like heavy crude so it can be piped over 160 kilometres from the field to produce gasoline.

Exodus

As diplomatic activity aims at peacefully solving the crisis, European officials held intensive meetings in Caracas with key players. Government and the opposition sent representatives to talks in Norway, the first between the two sides since National Assembly Speaker Juan Guaidó declared himself interim leader in January, arguing that Maduro’s re-election was fraudulent. Talks between government and opposition representatives aimed at resolving the political crisis ended without agreement. Despite lack of progress both sides said they want to continue talks. No date was set for a next round. PRC, Cuba, Iran, Russia, Syria and Turkey are allies of Maduro. 55 democracies recognise Juan Guaido as the interim president.

UN Refugee Agency UNHCR launched campaigns in Colombia, Peru, Panama and Costa Rica. Brazil, Ecuador and Trinidad and Tobago are among other countries in the region launching similar initiatives as UNHCR, and IOM, the International Organization for Migration announced 4 million left Venezuela. UNHCR requires an initial US$134 million in 2019 to continue responding to the exodus from Venezuela in 16 host countries.

A Farewell to Arms

Venezuela assembled one of the largest military armories in the Western Hemisphere, using the threat of a “Yankee invasion” as an excuse to stockpile Russian arms, financed through billions of dollars in Russian loans between 1999 and 2019. Russia’s state-of-the-art S-300 anti-aircraft missiles, hundreds of thousands of Kalashnikov rifles and ammunition and 5,000 Igla-S MANPADS(man-portable air defense systems, lethal threats to aviation ) are on public display in military parades or outlined in leaked military contracts. Forces may also possess sniper rifles, C4 explosives and other small arms and equipment. As the security situation worsens, the arsenal presents a grave threat to regional stability. Securing weapons from opportunistic traffickers with well-established smuggling routes and guerrillas should be a top priority for regional leaders.

The corrupt military has ties to regional guerrilla and criminal groups supporting Maduro and plays an active role in trafficking drugs and weapons. Narcogenerals may sell significant portions for profit before fleeing a collapsing regime. Armed paramilitary colectivos maintain repressive control over cities. Nonstate actors and transnational gangs exploit political turmoil and porous borders with Colombia and Brazil to build redoubts and consolidate power in vast ungoverned areas. Even if Maduro retains control of the decrepit armed forces, leaks compromise security of weapons and military material. Arms and drugs are overwhelming Trinidad and Guyana.

As summer driving begins heavy oil shortage hinders U.S. refiners

(Bloomberg) — A global shortage of heavy crude will create hurdles for key refining belts as they ramp up gasoline production for the summer. The plunge comes as a loss of crude supply from Venezuela and Iran due to stiff US sanctions and production cuts by Canada and OPEC, inflated the price of fuel oil, used to make gasoline through coking. Gulf Coast fuel oil, a byproduct of heavy crude, reached a six-month high in late April.

Shrinking heavy oil supplies suppressed refining margins on the Gulf Coast where profits from coking — a process where heavy crude is cracked into fuels such as gasoline and diese- are at their lowest levels in nearly a decade. Midwest refiners may not reach the high run rates of 2018..

Refining margins diverge as heavy oil market tightens

Gulf gasoline prices in the run-up to summer are also below the five-year average. Margins are weak but limmer profits may not necessarily mean less production. For June through August, runs are expected to reach t 9.3 MMbpd, similar to last year.

Midwest refineries rely on Western Canadian Select that became cheaper after Alberta eased some production limits. The inexpensive supply lifted coking margins for refiners but supply remains tight as Alberta retains mandatory output curbs until the end of the year. The supply crunch will reduce Midwest refinery runs to about 3.85 MMbpd during June-August, lower than 3.95 MMbpd last year.

Coking is a popular thermal process producing naphtha and distillate by refining the heavy end of crudes or heavy oils through carbon rejection as coke, a higher-value product. Petroleum coke is exported to Asia for the electric power and industrial sectors, as fuel inputs or a manufacturing raw material in the steel and aluminum industries.