Venezuela's 13-Year Low Output The Notable Exception in OPEC's Highest Output Levels Since August 2008

by Ship & Bunker News Team
Wednesday July 13, 2016

With 32.73 million barrels per day (bpd), the Organization of the Petroleum Exporting Countries' (OPEC) June crude production is the highest since August of 2008, with Saudi Arabia and Iran reporting steady increases, Nigerian and Libyan output recovered, and only Venezuela posting a disastrous 13 year output low, according to an S&P Global Platts survey.

This amounts to a 300,000 bpd output rise, far short of the 650,000 bpd some analysts think will soon be necessary to match anticipated 2017 consumption rates, but substantial enough for Eklavya Gupte, senior editor for S&P Global Platts to warn that "If the situation persists, the case for a return to some kind of production cap may gain traction."

While the largest output rise came from Nigeria (which posted an increase of 150,000 bpd to 1.57 million bpd), the poorest OPEC performer in June was Venezuela, whose 120,000 bpd decline resulted in its lowest monthly output – 2.15 million bpd - since February of 2003.

The S&P Global Platts findings were corroborated by an internal state-owned PDVSA report seen by analysts, who also believe there is little hope of a recovery in Venezuelan crude production anytime soon.

Moreover, according to a Reuters report, PDVSA sent 53,500 barrels of crude per day to Cuba in 2016, a 40 percent drop received by the island compared to the first six months of 2015.

All this is especially bad news for Eulogio Del Pino, the republic's oil minister, who last month stated publicly that "We have no doubt that within three to six months, we are going to be raising production between 150,000 and 200,000 bpd; we will get up to levels very close to our potential, in the order of 2.9 million bpd."

Del Pino based his hopes on PDVSA carrying out production improvements at its refineries and petrochemical sector, and joint ventures and new contracting arrangements with service companies.

The S&P Global Platts findings caused CNN Money to cite on-going power rationing, sky-high costs, and cash shortage as some of the reasons why Venezuela's production hit a 13 year low, and it predicts that "Unfortunately for Venezuelans, the declines in production mean that crucial oil revenues may shrink further, despite the recent rise in prices to around $45 a barrel."

Thomas O'Donnell, a senior energy analyst at Wikistrat, summarized the country's plight accordingly: "It's coming together now in a perfect storm."

Last month, Erwin Cifuentes, a contributing editor for Southern Pulse Info, predicted that this perfect storm means  "daily production could fall below 1.9 million bpd for the first time since 1989, and around a 40 percent drop from 1998."