Venezuelan Oil Exports Declining Very Slowly

| About: The United (USO)

Summary

The oil export curve for October is concave.

Not a single tanker sailed to China in October.

Without China, Venezuela’s oil output in October is not different from September.

Venezuela, as you probably know, is in a period of instability. There are shortages of food, drugs and other basic necessities. Oil workers have been selling their uniforms to buy food. There have been messages that Venezuela's oil output is already declining. Let's take a look.

Venezuela oil exports from 16 September to 16 October

Source: Tanker tracking data, author's calculations.

My previous update on Venezuela was in late September, so let's take a look at October. There were three supertankers with 2.1-2.2 mbbls sent to Japan, South Africa, and India. Two tankers carrying 1.1mbbl each departed for the U.S. and Bonaire Sint Eustatius. The above- mentioned ships made up one-third of oil leaving Venezuela in the first half of October. As we can see in the chart above, oil is declining -- but very gradually. The seven-day red lines are a bit concave and do not quite fit into a straight line. If the figures for October oil output become lower, I assume this (possible) decline to be not more than 5$-10%.

Of course, this scenario is based on the assumption that the current flow of events will continue on as it is now. The possible collapse of PDVSA, the Venezuelan state oil company, is not included in this scenario. Even if it does happen, I assume there still could be some oil outflows from Venezuela, as stockholders would be interested in increasing their total residual distributable wealth. Overall, going deeper into the exact scenario of a PDVSA short-run possible default would merely be speculation. I just want to note that I see the possibility of complete export termination as a very unlikely scenario.

There is one thing that's very surprising to me about October data.

Venezuela Oil Export by Country of Destination between 1 and 16 October 2016 Click to enlarge

Source: Tanker tracking data, author's calculations.

When I first looked at the above chart, I realized there was something wrong with it, but could not figure out what. And then I realized --wait, where is China? Detailed ship-by-ship data also did not show any evidence of exports of oil from Venezuela to China. One should be careful as sometimes oil to China can flow through Singapore, but that is not the case in October. If readers have an explanation of this phenomenon, I would appreciate that. I think the answer to this question should be connected with a deal between China and Venezuela to deliver oil as a payment for loans.

If we exclude China, the line in the first chart above would be exactly straight. This could mean two things: If Venezuela sold oil to China for money, then Venezuela's oil output is declining; if it was for loans only, then its sold (not sent, but sold) oil did not change between Sept. 16 and Oct. 16. This coincides with what I know from the source in a company buying oil from Venezuela: Tankers are going full since the middle of September (as of Oct. 12).

Overall, it is still too early to talk about a massive export shortage from Venezuela. We need to look closer at what will happen with exports to China, whether they resume or not. I do not forecast October oil exports to be more than 5%-10% lower than what they were in September.

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Additional disclosure: The material presented in this article is provided for informational purposes only and is based upon information that is considered to be reliable.