South America has raised its oil exports more than the U.S. has done so far this year as key producers in the region boosted production and shipments to a world scrambling for crude that’s not dependent on the Strait of Hormuz.
Over the past five years, South America’s biggest producer and exporter, Brazil, has started production at several new offshore platforms in the Santos pre-salt fields. Guyana has continuously increased overseas shipments as the Exxon-led consortium starts up developments at fields in the offshore Stabroek block, where more than 11 billion barrels of oil equivalent have been found over the past decade.
Colombia, Ecuador, and Peru have seen their crude output decline. Venezuela, however, is raising its output after more than six years of crumbling production and exports between the U.S. sanctions on the Venezuelan industry in 2019 and the U.S. capture of Nicolas Maduro early this year.
In the past two months, Venezuela has boosted its oil exports to a seven-year high and is set to further ramp up shipments as U.S.-controlled sales, easing sanctions, and returning international firms lifted Venezuela’s oil production.
The rise of supply from South America couldn’t have come at a better time for these producers—buyers are scrambling for supply that doesn’t need passage through the Strait of Hormuz after the Middle East war crippled exports from the world’s most important exporting region. Related: U.S. Oil Shocks Don’t Hit Like They Used To, Fed Study Finds
The combination of rising production in Brazil, Guyana, and Venezuela, and the high global demand for non-Middle Eastern barrels has made South America the biggest contributor of additional oil supply this year.
South America’s oil exports jumped by a total of 155 million barrels between January and May from a year earlier, higher than the additional 112 million barrels the United States shipped during this period, according to data by intelligence firm Kpler cited by Reuters columnist Gavin Maguire.
The U.S. remained the nation with the biggest jump in oil exports, which have hit record highs in recent weeks. But collectively, South America topped North America as the biggest contributor to the rise in global oil supply.
Not that this increase would offset much of the massive loss of exports from the Middle East, where about 675 million barrels of oil never made it to buyers so far this year. Combined with the huge production shut-ins in the Middle East, the world has already lost more than 1 billion barrels of oil supply since the beginning of the Iran war, according to Kpler’s estimates.
Brazil’s Steady Rise
Brazil’s oil exports have surged since 2021 and have increased further since March, with shipments to China doubling amid supply losses from the Middle East.
Brazil’s share of total Chinese crude imports jumped from around 10% in January to about 18% in April, even as China’s overall import demand weakened, data showed earlier this year. The 1.43 million barrels per day of Brazilian crude that Chinese refiners received in April was the highest monthly reading on record, surpassing the previous record set in February.
Exports in May slowed as state oil giant Petrobras looks to boost local refining volumes to ensure sufficient domestic fuel supplies, but the trend is toward higher exports throughout the year, especially if the Middle East disruption drags on.
Guyana’s Miracle
Elsewhere in South America, Guyana has become one of the fastest-growing oil exporters and an oil-producing powerhouse with nearly 1 million barrels per day of production capacity in just seven years.
Now Guyana is poised to materially increase its oil revenues and its position on the global oil map as the war in Iran has hiked oil prices and has buyers scrambling for crude from outside the Middle East.
After starting up its fourth project, Yellowtail, last year, the Exxon-led consortium operating Guyana’s Stabroek block hit 900,000 barrels per day (bpd) of oil production.
Production capacity from eight developments is expected to reach 1.7 million bpd by 2030.
Guyana is set to reap huge benefits from the current turmoil in international energy markets—and some of the benefits could be even more important than money.
The closure of the Strait of Hormuz led buyers to view non-Middle Eastern crude as a more reliable energy source. Countries with open access to the Atlantic, such as Guyana and Brazil, are not forced to scramble for solutions if a chokepoint is closed, blockaded, or subjected to missile attacks.
Venezuela’s Return
Last but not least, Venezuela is back on international markets with its oil sales under U.S. control and being marketed by top commodity trading houses Vitol and Trafigura. Venezuela’s oil exports hit a fresh seven-year high in May as shipments to the United States and India surged.
Venezuela has been steadily increasing its oil exports since the U.S. took control over its oil sales following the capture of Maduro early this year. The U.S. has eased sanctions on Venezuela’s oil industry and its state oil firm PDVSA, allowed Western firms to return to Venezuelan operations, and has encouraged American companies to sign production and export deals.
“Venezuela’s crude output recovery is no longer speculative,” Kpler’s Naveen Das wrote in an analysis last week.
Venezuelan output is aggressively recovering, targeting nearly 600,000 bpd growth on the year to 1.3 million bpd in 2026.
The issuance of new operating licenses is set to further boost Venezuela’s output toward 1.5 million bpd by 2027, according to Kpler.
By Tsvetana Paraskova for Oilprice.com
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