Venezuela, which has produced seven Miss Universe winners, reigning American League MVP José Altuve and the capybara, the world’s largest rodent, is engaged in a vivid demonstration of what an epic national meltdown looks like as it loses the ability to produce oil. It’s not pretty.

Earlier this week, the OPEC member that has been forced to import oil had assets belonging to its national oil company seized on four Caribbean islands. The court action was triggered by ConocoPhillips’ effort to enforce a $2 billion arbitration award stemming from the nationalization of the company’s assets in Venezuela in 2007.

Venezuelan national oil company PDVSA stored about 4.8 million barrels of crude and fuel oil on the Dutch-controlled islands of Bonaire and St. Eustatius, less than 10% of the terminals’ capacity. In 2017, PDVSA shipped more than 400,000 barrels per day (bbl/d) from those two islands along with Aruba and Curaçao.

PDVSA has shifted most of its shipping to Venezuela’s east coast port of José and recalled tankers to avoid seizures. The country’s crude exports fell 29% in the first quarter compared to the same period in 2017 and it now imports about 200,000 bbl/d, mostly from the U.S.

The near-total collapse of Venezuela’s economy and social fabric is driven by the country’s wealth, for all intents and purposes, derives from its petroleum reserves, which are the largest in the world. In the last year, 1 million Venezuelans have fled across the border into Colombia.

And that’s not the biggest oil and gas story in the world right now. In explaining why oil prices shot up 3% in a day, Helima Croft of RBC Capital Markets listed several factors in an interview with CNBC:

  • Tight oil market as a result of the effect of OPEC cuts on inventories and strong demand;
  • The aggressive withdrawal from the Iran nuclear deal by the U.S.; and
  • Rising tension in the Middle East, including Houthi rebel missile launches from Yemen into Saudi Arabia.

That does not even include the Israeli missile barrage on Iranian positions in Syria that happened after the interview.

“I think it’s all coming together in a combustible mix for the oil market right now,” said Croft, who was an analyst for the CIA.

How would a major Latin American producer’s catastrophic implosion affect all this? We might know sooner rather than later.

Natural gas forward pricing is looking gloomy, but En*Vantage Inc. takes issue with the recent Raymond James forecast range of $2.25 per million Btu (MMbtu) to $2.50/MMbtu from 2019 onward. That forecast is based on the expectation of very strong growth of associated natural gas that will accompany anticipated soaring increases of crude oil production from the Permian Basin.

Alas, the mighty Permian faces constraints in takeaway capacity. As Tellurian Inc.’s (NASDAQ: TELL) Charif Souki said at CERAWeek earlier this year, if that capacity to move gas out of the basin does not materialize, then producers will have to cut back on drilling. Production growth may increase elsewhere, but oil and gas prices would remain stable in that scenario.

Margins narrowed at Mont Belvieu, Texas, in the past week for all but C5+, which expanded by 2.8%, and butane, which widened slightly. Ethane’s margin shrunk by almost 14% to about 7.4 cents per gallon. Prices of most NGL slipped.

In the week ended May 4, storage of natural gas in the Lower 48 experienced an increase of 89 billion cubic feet (Bcf), compared to the Bloomberg consensus forecast of 88 Bcf, the U.S. Energy Information Administration reported. The figure resulted in a total of 1.432 trillion cubic feet (Tcf). That is 37.6% below the 2.295 Tcf figure at the same time in 2017 and 26.6% below the five-year average of 1.952 Tcf.

Joseph Markman can be reached at jmarkman@hartenergy.com and @JHMarkman.