Venezuela Oil Production Falls To 40 Year Lows As OPEC Admits To Lower-Than-Predicted Global Demand

OPEC says its Reference Basket fell nearly 7 percent in July

Even though analysts characterize the current oil market as overbearish, contained in the August 2016 edition of the Organization of the Petroleum Exporting Countries' (OPEC) Monthly Oil Market Report is the troubling disclosure that its Reference Basket fell nearly 7 percent in July "amid lower-than-predicted demand, high refined product stocks during the peak summer driving season, and rising crude supply."

This comes just one day after news that Saudi Arabia and Iran are pumping oil at record volumes, the former producing 10.67 million barrels per day (bpd) in July.

More troubling still is the fact that OPEC has not given any tangible signs of a willingness to slow production, despite headlines trumpeting the impending discussion in September of yet another round of freeze talks; Ship and Bunker earlier this week quoted Greg Priddy, director of global energy with Eurasia Group, as saying, "I'm skeptical that we're going to see anything out of OPEC [and] I don't see anything out of Saudi; their silence is rather telling."

Meanwhile, the price collapse caused by the relentless production rates has contributed to OPEC members such as Venezuela producing just over 2 million bdp, according to OPEC figures: a 40 year low for the republic and a harbinger for yet more economic and social chaos amongst its citizenry.

OPEC in its August report also conceded that, "cheap crude has led refiners to produce more refined products worldwide, adding to the oversupplied market; the overhang of gasoline in storage amid what should have been a top seasonal demand period put downward pressure on crude and refined product prices."

Still, analysts maintain that oil prices will only remain choppy in the near term as a proper re-balance takes hold: Helima Croft, head of commodity strategy for RBC Capital Markets and colleagues Michael Tran and Christopher Louney stated in a note on Wednesday that, "Even as we march closer to the point where the daily global supply overhang turns to a deficit, a deluge of bearish headlines has kept the market on its heels."

They added that they "believe that the most significant bearish risks are overdone or have already been largely priced in."

While acknowledging that the most fragile OPEC members "remain in a state of distress," RBC noted that the "doomsday scenario" of Iran flooding the market with product and thus exacerbating the glut even further has been "overblown"; Croft and colleagues predict Brent and West Texas Intermediary prices will average $64 and $66 per barrel by 2017.

Earlier this week, Venezuelan president Nicolas Maduro told media he is rallying support to organize a meeting with OPEC to "stabilize" oil prices at $40 per barrel, although he has earlier stated a desire to see prices return to the $70s.