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Venezuela's Oil Output Crash Is Costly for U.S. Refiners

Updated on
  • Venezuelan production has plummetted, cutting into exports
  • The price gap between WTI and Venezuelan oil is shrinking

U.S. Gulf Coast refiners are paying the price for shrinking Venezuelan crude output.

U.S. production is at an all-time high, while output from the Latin American nation, despite a modest increase in January, is in decline. As a result, U.S. crude’s typical premium to heavy Venezuelan oil shrank to as small as 31 cents a barrel Friday, the narrowest since October.

Most U.S. Gulf Coast refiners profit when crude grades like those from Venezuela are at a large discount to WTI because these so-called heavy crudes comprise 40 percent to 60 percent of the oil they process, said Fernando Valle, oil and refining analyst at Bloomberg Intelligence.

Venezuelan oil is getting more expensive relative to U.S. benchmark amid falling output from Latin American nation

“The narrowing can be attributed to a rapidly changing fundamental picture in both markets,” Mara Roberts Duque, a New York-based analyst at BMI Research, said by email. “Rising U.S. production is keeping a lid on the WTI upside while continued declines in Venezuelan output are supporting the local benchmark.”

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