Two threats could further disrupt Venezuelan exports, possibly taking as much crude off the market as the renewal of Iran sanctions.

 By Spencer Jakab

May 10, 2018 5:30 a.m. ET

The oil headlines this week have all been about Iran, but the slowly unfolding disaster in Venezuela may be even more significant.

Less than two weeks before a controversial snap presidential election that would almost certainly give incumbent Nicolás Maduro a six-year term, the country?s main source of export revenue could take another drastic tumble ( . S&P Global Platts estimates the country’s recent crude production was 1.41 million barrels a day, at least a 30-year low except for a crippling 2002-2003 strike. And over half a million barrels below what it was a year ago.

Venezuela faces two risks that, if both come to pass, could cut its oil output ( by more than the biggest estimates of what could happen ( to Iran if sanctions were reimposed. The risks stem from Venezuela?s dependence on importing lighter varieties of crude to mix with the heavy oil it produces, and its need for products imported from the U.S. to enable its thick oil to be transported.

The first situation is playing out in the Dutch-administered islands of Curaçao and Bonaire, where Venezuela’s state oil company owns refining and storage facilities. U.S. producer ConocoPhillips ( is attempting to take physical control of those facilities after winning an arbitration award against Venezuela for seizing its assets in 2007. Venezuela appears to be telling its suppliers not to ship oil to these facilities for fear ConocoPhillips will seize that too, potentially shutting down refining.

The second situation would play out if the U.S. halts exports to Venezuela of a product called diluent, which allows the thick oil to be transported. Such a move would imperil half or more of the country?s remaining production. U.S. Vice President Mike Pence has already called the presidential election ( a sham.

Energy economist Philip Verleger estimates the Conoco spat could cost Venezuela as much as 500,000 barrels a day in exports, which is the upper end of the estimated impact of reimposed Iranian sanctions. An embargo could hurt even more. Don?t look east for oil’s next wild card, look south.