The United States’ decision to seize and redirect sanctioned Venezuelan crude to American ports has intensified pressure on an already fragile oil system, raising the risk of a sharp near-term production collapse in the world’s largest proven oil-reserves holder.
US President Donald Trump said Washington would take control of between 30 million and 50 million barrels of Venezuelan oil—equivalent to roughly 40–50 days of current output—sell it at market prices, and manage the proceeds under US oversight. The move follows a naval blockade and expanded enforcement against tankers moving Venezuelan crude, effectively freezing the country’s export routes.
Storage Is the Binding Constraint
According to vessel-tracking data from Kpler, Venezuela was producing around 900,000 barrels per day before the blockade. Output has already fallen by about 8% and could drop as low as 600,000 bpd by February if exports remain constrained. With onshore storage close to capacity and floating storage filling rapidly, operators warn that wells—especially in the heavy-oil Orinoco Belt—may have to shut.
Analysts at Rystad Energy caution that Venezuela faces a “short-term production collapse” if oil cannot be evacuated. Heavy crude requires continuous flow and blending with imported diluent; once production is halted, restarting can take months and permanently damage reservoirs.
Heavy Oil, No Diluent
Venezuela’s problem is structural as much as political. Years of under-investment, mismanagement, and a loss of skilled workers have degraded infrastructure. The country relies on imported naphtha to dilute its molasses-like crude so it can move through pipelines. Russia has been the main supplier, though it previously sourced naphtha from the US. With sanctions tightening, access to diluent has narrowed further, squeezing output just as storage space disappears.
A senior analyst at TD Cowen described the oilfield system as “atrophied,” noting that “everything is lacking”—from maintenance crews to spare parts.
Chevron as the Exception
One notable carve-out remains. Chevron has continued exporting Venezuelan crude, including to US refineries, under special licences from Washington. Light and medium-grade fields, as well as those operated by Chevron, are expected to keep pumping for now, according to engineers familiar with PDVSA operations.
Chevron has reportedly been in discussions with PDVSA and US authorities about lifting some stranded barrels to ease pressure on storage and prevent irreversible damage to assets. Several tankers chartered by the US supermajor are already en route to Venezuelan ports, suggesting limited operational relief even as broader sanctions bite.
Geopolitics Meets Oil Physics
The White House has framed the seizure of oil as a measure to ensure proceeds benefit both Venezuelans and Americans. Critics argue it deepens perceptions of coercive resource control and risks accelerating Venezuela’s industrial decay. Jeffrey Sonnenfeld of Yale warned the approach was “confiscatory” and unnecessary in a market that is not short of supply.
For markets, the immediate impact has been muted—Brent and WTI prices fell modestly after the announcement—reflecting the reality that Venezuela’s barrels are already heavily discounted and logistically constrained. The longer-term risk, however, is asymmetric: once fields are shut, bringing them back is far harder.
Jason Bordoff of Columbia University’s Center on Global Energy Policy summed up the dilemma: forcing production halts today may complicate any future effort—by the US or a successor government in Caracas—to rehabilitate Venezuela’s oil sector.
Why It Matters Beyond Venezuela
For oil producers such as Nigeria, Angola, and Colombia, the episode is a reminder that supply disruptions are increasingly driven by geopolitics and infrastructure fragility rather than geology. For refiners, particularly in the US Gulf Coast that process heavy crudes, Venezuelan barrels remain technically valuable but politically toxic.
And for Venezuela itself, the immediate question is brutally simple: without export outlets, storage, or diluent, oil in the ground may soon be oil that cannot be produced at all.