Watchdog: Venezuela's oil industry at risk of collapse

Mae Love
March 17, 2019

Meanwhile, sources told Reuters that OPEC producers and their partners are expected to extend their cuts to oil supply when they meet in June, a decision likely to keep prices elevated.

The sole point of consolation for Opec and its allies including Russian Federation in the report was that though the global oil demand growth is set to ease as the Chinese dragon slows down, yet it would still rise by an annual average of 1.2mbpd to 2024, reaching 106.4mbpd then.

Crude oil future prices were volatile Friday morning after reaching highs for the year earlier this week, with the immediate focus remaining on potential geopolitical supply issues.

The Organization of the Petroleum Exporting Countries (OPEC) and some non-aligned producers including Russian Federation have been withholding oil supply since the start of the year to tighten global markets and prop up crude prices.

With a nationwide blackout that paralysed the country for one week, demonstrating the unreliability of the country's electricity network, new questions are being raised about Venezuela's ability to continue to produce and export oil.

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With OPEC withholding supply and USA sanctions preventing Iranian and Venezuelan oil from entering markets, global crude flow data in Re-definitive showed a slight supply deficit likely appeared in the first quarter.

Crude has rallied nearly 30% this year as the Organisation of Petroleum Exporting Countries and its allied partners - known as Opec+ - capped their output to bring the market back to balance.

"OPEC's compliance was a robust 94 percent, compared to 51 percent from non-OPEC", said the IEA, adding that major producer Russian Federation was continuing to adjust its production gradually.

The U.S. Energy Information Administration (EIA) said U.S. commercial crude oil inventories fell last week as refineries hiked output. With increasing competition, the global demand for OPEC production will not return to pre-2016 levels during the period in question.

The OPEC-led production cuts which began on January 1 and the US sanctions against Iran and Venezuela have been carrying crude oil prices higher for months, but gains have been limited by concerns over rising USA inventories and production. The share of petroleum products in the country's exports is 1.54 percent. This week the EIA reported a fall of 3.9 MMbbls (million barrels) in United States crude oil inventories compared to a Reuters poll for a rise of 2.861 MMbbls for the week ended March 8. Production in Iran and Libya, also exempt, was little changed.

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