CARACAS, April 22 (Reuters) - Venezuela's state oil company PDVSA is increasingly using its limited output of medium and light crude for refining, resulting in shortages for blending operations to produce exportable grades, seven people close to the matter said.

Petroleos de Venezuela typically utilizes most of the country's lightest crude production for blending operations for crude from the Orinoco Oil Belt, one of the world's largest oilfields by reserves.

But in the wake of debilitating, months-long shortages of motor fuels last year, PDVSA has increased refining output, and its refineries use light crudes as their principal feedstock.

That has prompted an output cut of its flagship crude grade for exports, Merey 16, which is produced by mixing tar-like extra heavy crude from the Orinoco belt with naphtha for transportation, and then diluted with lighter oil to be exported.

A drop in crude shipments, Venezuela's main export, would be a blow to government revenue. But gasoline sales have generated substantial revenue for PDVSA since it started pricing the fuel in dollars last year, winding back years of generous subsidies.

PDVSA's reliance on Mesa 30 and Santa Barbara crudes from eastern Monagas state as diluents has grown since U.S. sanctions imposed in early 2019, aimed at ousting President Nicolas Maduro, cut off the company's supply of imported naphtha.

PDVSA used that imported naphtha to produce another exportable grade, diluted crude oil (DCO), but in the wake of sanctions, it has depended more on light crudes to produce Merey 16.

"They need to distribute the production between the refineries and blending in the Belt," one industry source said on the condition of anonymity, adding that light crude production was around 160,000 barrels per day (bpd). "There is not enough for both."

Neither PDVSA nor Venezuela's oil ministry responded to requests for comment.

Venezuela had boosted crude output to some 525,000 bpd in March, according to figures it provided to OPEC, allowing it to export 690,323 bpd. While both figures were well below pre-sanctions levels, they represented a continued recovery on both fronts from mid-2020 lows.

But in mid-April, the Orinoco belt was producing just 190,000 bpd, down from 286,000 bpd as recently as January, according to documents seen by Reuters, a drop which three of the sources attributed to the dwindling availability of diluents.

As of April 18, stocks of naphtha, Santa Barbara and Mesa 30 crudes at the Jose port, where PDVSA stores most of its diluents, were at only 1.01 million barrels, versus 2.3 million in mid-January.

The drop came as PDVSA resumed gasoline output at its 187,000 bpd Puerto La Cruz refinery for the first time in years, while maintaining fuel output relatively stable at its Cardon and Amuay refineries.

PDVSA does not publish figures on fuel production, but sources consulted by Reuters estimated that Cardon and Amuay together were processing 230,000 bpd of crude to produce around 60,000 bpd each of gasoline and diesel, and that Puerto La Cruz was producing between 14,000-18,000 bpd of gasoline and 9,000-20,000 bpd of diesel last week, before a power outage halted output at Puerto La Cruz over the weekend. (Reporting by Luc Cohen in Caracas and Marianna Parraga in Mexico City Additional reporting by Mircely Guanipa in Maracay, Venezuela and Deisy Buitrago in Caracas Editing by Marguerita Choy)