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Earthquakes in Venezuela and Wildfires in Canada Tighten Heavy Crude Supply Outlook, Kpler Says

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Global crude supply conditions are tightening at the margin as the earthquakes in Venezuela and escalating wildfire activity in Canada inject fresh uncertainty into heavy crude availability, even as broader market balances remain loosely supplied, Kpler analyst Naveen Das said in a Friday note.

Markets are also responding to the gradual reopening of the Strait of Hormuz and the potential for additional unsanctioned Iranian crude flows, which could further lengthen global balances. Heading into the Northern Hemisphere summer, seasonal demand strength is increasingly intersecting with weather-driven and geological supply disruptions, a pattern that is becoming more frequent and harder to price in.

Venezuela has been struck by consecutive earthquakes of magnitude 7.2 and 7.5. While reported structural damage has been concentrated in Caracas, seismic activity was felt across the country, including at Lake Maracaibo, the historic hub of Venezuelan oil production located roughly 500 km from the epicenter.

State oil company PDVSA has not confirmed operational impacts, but the scale of the quakes raises the risk of disruption to upstream facilities, pipelines, and export infrastructure. Any damage to heavy sour production systems would likely lead to a rapid repricing of Atlantic Basin supply.

Venezuela has added roughly 330,000 b/d of output since the start of the Russia-Ukraine war, making it a key marginal source of heavy crude supply. That recovery now faces renewed downside risk from potential seismic damage.

Despite generally oversupplied spot fundamentals, market positioning suggests sensitivity to upside price moves if outages persist, particularly in heavy sour grades where replacement barrels are limited.

In parallel, extreme weather is intensifying supply risks in Western Canada. A severe heatwave in northwestern Alberta has triggered 14 lightning-ignited wildfires in Mackenzie County, Alberta, with five already classified as out of control. The town of High Level is under a "very high" fire danger rating, increasing the likelihood of production curtailments across nearby oil sands and conventional heavy-crude operations.

Canada has previously seen wildfire-driven losses of around 330,000 b/d over roughly two-week periods since 2023, underscoring the scale of potential disruption if conditions escalate.

Together, Venezuela's seismic events and Canada's wildfire season are tightening near-term heavy crude supply expectations, even as broader global balances remain weak.

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