Venezuela turmoil could push oil market into deficit: IEA

16 March, 2018, 02:05 | Author: Salvatore Jensen
  • Brent Crude

OPEC has finally acknowledged what everybody else had concluded some time ago: USA shale output is soaring.

Oil prices have firmed since Opec's November 2016 agreement to cut oil production by 1.2 million barrels per day (bpd), while non-Opec members, led by Russian Federation, agreed to cut production by 558,000 bpd. Indeed, it is pressuring crude oil market down. This is marginally higher than last month's assessment.

The U.S. Energy Information Administration (EIA) said in a weekly report on Wednesday that the country's crude stocks rose by 5 million barrels last week, the biggest jump since late January, beating market expectations.

Lack of investment and financing, mismanagement, sanctions, and a brain drain are among the causes of the steep decline, which has particularly affected shipments to the United States.

OPEC crude oil production edged lower in February to 32.1 mb/d, led by losses in Venezuela and the UAE.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. Several new or expanded pipelines came online in 2017 to move crude oil from producing regions, primarily the Permian basin of Texas and New Mexico, to the U.S. Gulf Coast.

Oil held gains near $61 a barrel on signs of robust fuel consumption in the US and as the International Energy Agency forecast a supply deficit this year.

Still, last week's massive products draw buoyed prices on Wednesday. They have extended the pact until the end of 2018.The deal has helped boost oil prices, which topped $71 a barrel this year for the first times since 2014 and were trading near $65 on Wednesday. This week Mark Papa, former CEO of EOG Resources and presently chairman and CEO of Centennial Resource Development, told The Wall Street Journal that he is skeptical of the forecasts that US production growth will swamp global supplies.

Global oil prices have swung wildly in recent years as producers struggled to meet demand only to flood the market with supplies as they tried to squeeze rivals out of business. A broader market slump initially drove prices lower, while surging American production and increasing inventories remain a challenge.

But since Opec expects demand this year to grow by only 1.62-million barrels a day, that would leave the market slightly oversupplied and may require more or longer supply restraint. The shockingly low level of new discoveries is the direct result of a dramatic fall in spending on exploration.

Venezuela holds the world's largest proven oil reserves, but production has plummeted as the economic crisis has stalled business activity in the socialist nation. Is the global market just showing a typical seasonal lull, or warning of something more ominous?

China beat forecasts with a 7.2 percent year-on-year rise in industrial output in the first two months of 2018, while data showed Chinese crude output fell 1.9 percent.

Venezuela's crude output was expected to continue to drop, even if Tillerson had remained as the U.S. top diplomat.


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