Venezuela has been downgraded by the ratings agency Standard & Poors to “selective default”. While the financial implications in the short-term remain unclear, a default would add to pressure to an already declining oil production trend. In our base case we expect Venezuela's oil production to fall by 84,000 b/d in 2018 to reach 1.9 million b/d. However, if PDVSA's liquidity deteriorates further – due to the challenging operating environment, restricted access to diluent, or unplanned upgrader shutdowns, we estimate a further 350,000 b/d of production could be taken out of the market. This could add $3-$5 per barrel to our 2018 base case oil price forecast of $52 per barrel for Brent. The additional production decline puts Venezuelan crude exports to Europe and Latin America at risk and sales to US refiners could range between 250,000-500,000 b/d. The light-heavy crude differential could narrow even further as crude runs increase in the spring of 2018.