Americas News
Major Disruption in Venezuelan Oil Production in 2016, 2017, ESAI Predicts
Despite extensive government initiatives, Venezuela is suffering an economic crisis that could result in debt payment default in 2016 or 2017 - which in turn would trigger a major disruption in oil and products supply, including bunkers, ESAI Energy LLC reports.
But ESAI's August 6 Latin America Watch also notes that "a sinking Venezuela could lift many other boats."
ESAI cites a number of factors to support its prediction, key being that Venezuela's oil basket recently priced at 25 percent below the $60 government target for the 2015 budget: "That figure is much lower than fiscal break-even price estimates."
The energy analyst went on to note that rising production costs ($18 per barrel this year compared to $11 in 2013) have undermined the oil industry's ability to generate enough money for debt servicing that now stands at $6 billion.
ESAI believes Venezuela's economy will shrink by another 4 percent next year following declines of 4 and 7 percent in 2014 and 2015, and it "does not expect the price of Brent, which typically runs $8 to $10 above Venezuela's crude basket, to recover much value next year, further limiting government income."
Oil typically represents 95 percent of Venezuela's dollar-denominated export earnings.
ESAI concludes that only a severe reduction in crude output in an at-risk country like Angola, Nigeria, or Russia will prevent a major disruption in Venezuela's oil operations.
However, it adds that the country's "supposed" allies in OPEC and elsewhere "might be rather comfortable with a supply disruption in Venezuela rippling through global oil markets, not to mention U.S. shale operators."
ESAI in May predicted in its Medium and Long-term Global Oil Outlook briefing that the current oil glut will not be fully rebalanced until 2018.
