Venezuela’s oil production fell for the six month in a row

Crude oil production in Venezuela fell for the sixth month in a row in June. This highlighted the country’s oil industry’s plight due to US sanctions and declining demand following the Coronavirus disaster.

According to Venezuela’s state-owned company, Petróleos de Venezuela (PDVSA) documents, and the Venezuelan Ministry of Petroleum, the country saw a 32 percent drop in production in June. The company reduced its production by about 200,000 barrels per day compared to the previous month.

As of June 28, oil production was at 42,400 barrels per day, according to the report.

Venezuela, which has the world’s largest crude oil reserves, is trying to revive its oil industry. Meanwhile, the Trump administration has increased sanctions to remove Venezuelan President Nicolas Maduro.

How do US sanctions affect Venezuela?

Venezuela, which has been suffocated by the severe economic crisis, has had financial sanctions, which complicate debt issuance, imposed on them. 

According to the PDVSA, the White House decree prohibits trading new debt issued by the Venezuelan government and its state oil company. 

The US set the previous sanctions against Maduro. At the time, Washington accused him of breaking democracy, promoting corruption and violating human rights.

Maduro considered the sanctions crazy. He called US companies that buy Venezuelan oil to an urgent meeting to analyze the consequences. 

The United States has banned at least 50 tankers used to export Venezuelan oil or deliver gasoline to the US. This significantly reduced oil exports, which are critical to the Maduro government.

Foreign companies have canceled purchases of Venezuelan oil shipments. As a result, oil storage capacity is now at its limit. Furthermore, Petróleos de Venezuela has had to close its wells.

In May, the country drilled only one rig to extract oil, and production fell to a level not seen in the past 73 years.

Rafael Quiroz, an oil expert, considers that the decision will affect the financial situation and the cash flow of the government and the PDVSA. Furthermore, if Venezuela decides to issue new debt, it cannot count on any company in North America or any other country with financial activities in the US. This will put a lot of pressure on the government, and the government will feel much more trapped, Quiroz said.

A shortage of food and medicine characterizes the harsh economic crisis that suffocates Venezuelans. The severe inflation could end this year at 720%.

Analysts estimate the country’s debt to be more than $100 billion. Meanwhile, its international reserves have been reduced to $10 billion, the majority of which is in gold bars.