Venezuela Slashes Oil Output as US Blockade Halts Exports

Venezuela is being forced to sharply reduce oil production, despite holding the world’s largest proven crude reserves, as US restrictions have effectively paralysed the country’s ability to export oil.

The downturn is not driven by military conflict or natural disasters, but by a near-total transport blockade that has left Venezuelan crude trapped inside the country, overwhelming storage capacity and forcing producers to shut down wells.

What is happening

State-owned oil company PDVSA has begun closing oilfields and suspending operations at multiple wells. The sequence of events has unfolded rapidly:

• US restrictions on tanker movements have reduced Venezuelan oil exports to near zero.
• With exports halted, domestic storage facilities have reached capacity.
• Shortages of chemical diluents — required to process and transport Venezuela’s heavy crude — have further constrained operations.
• PDVSA has been forced to shut in production to prevent a complete system breakdown.

Scale of the collapse

As recently as November, Venezuela was producing approximately 1.1 million barrels per day and exporting around 950,000 barrels. Following tighter enforcement of sanctions in December, exports fell to roughly 500,000 barrels per day. More recently, shipments have been almost entirely suspended.

The abrupt loss of export capacity has left production volumes unsustainable, accelerating the need for widespread shutdowns across the sector.

Knock-on effects

The crisis extends beyond PDVSA’s core operations. The company has requested production cuts across all joint ventures, including projects involving foreign partners such as Petrolera Sinovensa and Petropiar.

This means the impact is being shared by international stakeholders, amplifying the economic fallout and increasing uncertainty for companies with exposure to Venezuelan assets.

Broader implications

The United States appears to be pursuing a strategy aimed at fully disabling Venezuela’s oil industry rather than merely constraining its revenue. By targeting logistics, storage and processing capabilities, the pressure has evolved into a structural chokehold on the country’s primary economic sector.

Such developments carry broader risks for the global oil market, effectively sidelining an entire OPEC member and removing supply capacity at a time when geopolitical tensions remain elevated.