Venezuela's Oil Exports Grind Towards a Halt Under U.S. Pressure

Venezuela is having difficulty in getting its oil to market due to U.S. tanker seizures in the Caribbean, multiple officials told the New York Times and Reuters. Two laden VLCC tankers have been captured by the U.S. Coast Guard; another has been "pursued" back into the Atlantic without capture; at least several more have turned around mid-voyage, according to TankerTrackers.com; multiple tanker owners have declined signing new charters for future Venezuelan loadings, officials said; and about 30 tankers are stranded in the country's territorial seas, stranded by risk of capture and awaiting a safe political forecast for departure.

The oil buyers who pay for state oil company PDVSA's shipments to China are reticent to approve shipments because of the risk of seizure, company sources told Reuters. Chevron's loadings for export to the United States have continued unaffected - the company confirms that it has experienced no disruption - but PDVSA's storage tanks are filling up.

As an interim measure, PDVSA is using stranded foreign-flag tankers as floating storage, filling as many as possible in hopes of delaying the day when it will have to begin shutting in production for lack of a place to put the oil. So far, PDVSA has not declared force majeure to formally suspend loadings and reduce its contractual obligations.

According to Reuters, this strategy has its limits: some customers are pushing to offload their cargoes back to Venezuelan terminals, freeing up their tankers for onward voyages with less risk of interdiction.

To assuage buyers' concerns, Venezuelan dictator Nicolas Maduro has dispatched the country's navy to escort outbound tankers on their way to China. But those escorts are stopping at the boundary of Venezuela's territorial seas, according to the New York Times. So far, all interdictions have occurred in international waters.

Venezuela's national assembly approved legislation to criminalize tanker seizures on Tuesday, and officials told the Times that Maduro is contemplating putting Venezuelan soldiers aboard outbound tankers in order to counter the risk of a U.S. Coast Guard boarding. However, this would raise the odds of a direct military-to-military clash, which could trigger a broader and more forceful U.S. intervention. The Pentagon has built up the most substantial naval task force seen in the region since the Cuban Missile Crisis, including the supercarrier USS Gerald R. Ford and a three-ship Navy-Marine Corps amphibious ready group.

The U.S. pressure campaign is "probably" aimed at removing Maduro from power, President Donald Trump said Monday night at a press conference in Florida.

"Well, I think it probably would. I can't tell him. That's up to him what he wants to do. I think it would be smart for him to do that. But again, we're going to find out," Trump said. "If he plays tough, it'll be the last time he's ever able to play tough. . . . We have a massive armada for him."