Oil storage tanks at a Venezuelan facility burst and began leaking crude oil for four days, while global stockpiles reach their limit amid chronic market oversupply due to the coronavirus pandemic, Venezuelan media firm El Pitazo reported.
The head of the Venezuelan oil workers union, Eudis Girot, told El Pitazo that due to a lack of vehicles, workers were unable to access the oil shutoff valve. Girot added that the spillage is an indication of a lack of investment and maintenance in the country’s oil industry.
The spillage was a result of a fire that began on April 26, he said.
The coronavirus pandemic has caused a “historic shock” to oil markets as demand for petroleum products has nosedived due to the effects of lockdown policies while output increased earlier this year, triggering a shortage of storage space for oil.
Venezuela is home to the largest untapped oil reserves, but the country is in the midst of a political and economic crisis, which has hit the oil industry especially hard. Oil majors, such as Chevron, have been effectively forced to wind down operations in the Latin American country.
The country’s President Nicolás Maduro named Tareck El Aissami, a suspected Hezbollah supporter and US fugitive, as oil minister last week.
The government has also allegedly raided its gold vaults and handed tons of bars to its long-time ally Iran, according to people with direct knowledge of the matter.
Government officials from Venezuela loaded some nine tons of gold, worth around $500 million, on jets bound for Tehran as payment for Iran’s assistance in reviving Venezuela’s oil refineries, the people said, Bloomberg reported. The deal leaves Venezuela with just $6.3 billion in hard currency assets, according to official data, the lowest figure recorded in three decades.
Tank top remains critical issue
Oil prices have risen recently as some restrictions begin to ease, however storage space remains a critical issue.
“The market is still vulnerable but now one thing is clear, the demand bottom is behind us, and this is manifesting in oil prices which are on the rise. The existing problems did not magically get resolved, the storage constraint is still there, but a couple of weeks away, so we will see its effect on prices soon, as the market will get tight,” Rystad Energy’s Head of Analysis Per Magnus Nysveen said.
The shortage of space to store spare oil has led tankers to sit at sea full, waiting for a buyer.
On Tuesday, Indian Oil Minister Dharmendra Pradhan said that the country now had more than 50 million barrels of crude sitting on-board tankers at sea, as storage remains effectively full in India.
Meanwhile in late April, the US Coast Guard noted that there were an unprecedented 27 vessels waiting off the coast of Southern California filled with oil with nowhere to deposit. The oil off California alone would be enough to satisfy 20 percent of the world’s consumption, according to Bloomberg.