US Sanctions May Force Venezuela to Shut Down Oil Wells

Venezuela may soon be forced to start shutting down some of its oil wells due to a shortage of storage capacity, following the seizure of a tanker last week and the United States' plans to block other sanctioned vessels.

According to insiders familiar with the situation who requested anonymity because the information is private, the country's main oil storage facilities and tankers anchored at its terminals are filling up rapidly and could reach full capacity within about 10 days. If that happens, the state-owned company Petróleos de Venezuela, whose production is approaching one million barrels per day, may be forced to shut down some wells.

Chevron's Production Continues

Chevron stated that it continues production from its joint ventures with Petróleos de Venezuela without "any disruption," and that it complies with all applicable laws, according to the major oil company on Wednesday.

While the company uses non-sanctioned tankers to export crude to the US Gulf Coast, it remains unclear what indirect effects might arise if Petróleos de Venezuela is forced to shut down wells.

Trump's Campaign to Dry Up Oil Revenues

The increasing pressure reflects the Trump administration's intensified campaign to choke off oil revenues received by President Nicolás Maduro's regime. On Tuesday, US President Donald Trump announced a "full blockade" on all sanctioned tankers entering and leaving Venezuela and designated the regime as a "foreign terrorist organization."

Although the administration has not yet issued details or guidance regarding these two steps, shipping activity has effectively frozen, with market participants reluctant to transport crude to avoid the risk of seizure, according to sources.

Chevron said in a statement that it complies with "the sanctions frameworks provided by the US government. Any questions regarding the security situation in Venezuela should be directed to the appropriate US government authorities."

Half of Chevron's production of 200,000 barrels per day of Venezuelan oil goes to Petróleos de Venezuela under contract terms. Chevron operates in the country under a license from the US Treasury Department that exempts it from oil sanctions under restrictive conditions.

Shipping Restrictions and Potential Production Decline

Petróleos de Venezuela said its crude exports continue to operate normally, sailing with full security, technical support, and operational guarantees, according to a company statement. However, new restrictions on shipping Venezuelan oil and importing diluents—which Petróleos de Venezuela needs to produce and transport its extra-heavy crude—mean that "storage could fill up very quickly," according to Shriner Parker, partner and head of emerging markets at research firm Rystad Energy.

He added that once this happens, "we could definitely see production volumes decline very rapidly."

During Trump's first term, "maximum pressure" sanctions caused Venezuela's production to collapse to less than 500,000 barrels per day, according to Parker. Petróleos de Venezuela partially recovered by swapping its crude for a type of diluent from Iran. He said, "That is not a viable option this time with the US patrolling the Caribbean Sea."

Oil Tanker Congestion

According to sources, satellite images, and a shipping report prepared by Bloomberg, at least three supertankers—ships capable of carrying a total of 6 million barrels of oil—have already been loaded but remain in Venezuelan waters.

Venezuela relies heavily on what is known as the "shadow fleet," whose ships turn off their transponders or spoof signals to hide their location and sail undetected. Bloomberg's calculations show that the three vessels stuck in Venezuela are loaded with heavy Venezuelan oil valued at about $300 million.

The ships "Kraken" and "Galaxy 3," operating under false names, loaded last week and remain in Venezuelan waters. Another supertanker, "Kelly," which turned off its transponder a week ago, finished loading in recent days. A fourth ship sailing under the alias "Romana" is currently loading 1.9 million barrels of Venezuela's main crude, Merey 16.

Chevron managed to load shipments despite a recent cyberattack targeting Petróleos de Venezuela, which the company said disrupted its administrative operations at ports but did not affect its ability to produce or ship oil.

Venezuela accounts for less than 1% of global oil production, limiting the impact of the current disruption on prices.