Surging unrest in Venezuela began to overwhelm security forces in Caracas and other cities this week.
The government has started using sparse electricity and food supplies to try to extinguish violent protests and looting, but the strategy appears to be having the opposite effect.
The spiraling political and economic crisis is impacting oil production and exports in the Opec country. Argus estimates that crude production is trending down toward 2mn b/d or less as exports stall on payment problems and infrastructure bottlenecks.
The impact on the oil market of losing 1mn b/d of Venezuelan oil exports could be limited in the current market, with some observers estimating no more than a $10/bl price spike and Canadian crude well-placed to fill the gap.
Most Venezuelan crude exports go to the US, with an average of 830,000 b/d last year, but around 600,000 b/d goes to Chinese state-owned oil companies to pay down oil-backed loans.
The market impact of a steep decline in Venezuelan exports could grow sharper if the turbulence is prolonged or spills over into neighboring countries such as Colombia or the smaller island nations that still rely on Venezuelan oil supplies.
Internal and external oil movements in Venezuela could also be disrupted by an eventual international aid campaign to distribute desperately needed humanitarian goods.
The government regularly blames shortages on an "economic war" waged from abroad.
Power was cut off to the poor Caracas district of Petare yesterday amid clashes and looting that lasted throughout the night. Protests intensified in reaction to the blackout, with security forces deploying tear gas, water cannons and live ammunition. Two security officials suffered gunshot wounds and a food truck driver was shot dead today as protesters looted food trucks and stores in the poor La Vega district of western Caracas.
State-owned utility Corpoelec restored Petare's power supply partially early today. But roughly a third of the vast slum that lies at the eastern end of Caracas was still blacked out as of noon today. Electricity and water are already extensively rationed.
President Nicolas Maduro also cut power earlier this week to poor sectors of several populous cities in the interior including Barquisimeto, Maracaibo, San Felix and San Antonio.
The protests are mushrooming on the back of acute shortages of food and medicine, and government stonewalling of a petition to conduct a presidential recall referendum. Government officials routinely say they will not allow a referendum and say many of the signatures recently collected by the opposition are fraudulent, a charge vehemently denied by the opposition.
