LONDON – Venezuelan oil production crashed in a new low-term low month last month due to US sanctions and outages, the country said on OPEC, deepening the impact of a global production of output and further tightening of supplies.
Fostering US President Donald Trump‘s pressure on the group to ease its efforts to support the market, OPEC and Russia-led supply cuts, plus involuntary reductions in Venezuela and Iran, helped foster a rally 32 percent in unprofitable prices this year.
In a monthly report released on Wednesday, the Organization of Petroleum Exporting Countries said that Venezuela reported the group shed 960,000 barrels a day (bpd) in March, a drop of almost 500,000 bpd by February.
A Russian official showed this week Moscow wanted to pump more, though OPEC said the thresholds should remain. The figures may add a debate within the so-called OPEC + producer group if they will keep oil supply cuts beyond June.
Manufacturers will meet on June 25-26 to decide whether to expand the pact. OPEC, Russia and other non-member manufacturers are reducing output by 1.2 million bpd from January 1 for six months.
One of the main Russian officials to push the OPEC pact, Kirill Dmitriev, signaled on Monday that Russia wanted to increase production when it met with OPEC in June due to improved market conditions and the stock of the downturn.
OPEC’s report lowered its forecast for global demand growth by 30,000 bpd to 1.21 bpd, citing a slowdown in developed economies. OPEC + turned to supply cuts in 2019, as the slowdown in economic growth and demand would lead to a shrinking supply.
In a development that would ease OPEC’s concern for a new supply weakening, the report also said oil inventories in developed economies fell in February after rising in January.
THE SITUATION OF VENEZUELA
The Venezuelan production figure brings its numbers closer to external ratings, which have said that the country’s economic collapse has received a greater number of oil industry.
For a graph on OPEC’s oil supply cuts – March 2019.
In March, supply fell due to United States oil sanctions, PDVSA, designed to crush President Nicolas Maduro and power outages. Venezuela’s production, once a senior OPEC producer, has fallen due to years of the economic collapse.
Venezuela, plus Iran and Libya, were excluded from making voluntary sacrifices under the OPEC agreement, on the grounds that their score would probably fall anyway.
The share of OPEC from cutting is 800,000 bpd in most cases at the October 2018 level, and other figures in the report showed that manufacturers were pushing far more than agreed.
This is a legacy of old disagreements about how many countries were actually popping. The group uses two sets of figures to monitor production output – data from each country and from secondary sources involving industry media.
OPEC’s total production fell by 534,000 pounds more to 30,022 million bpd, according to secondary resource figures. It was not led by Venezuela, but from Saudi Arabia, which voluntarily reduced supply by more than agreed to support the market.
As a result, 11 OPEC members required to cut production reached 155 per cent in March with the promised brakes, according to a Reuters calculator, by February./Investing.com