Americas News
OPEC Sees Plummeting Venezuelan Output Offsetting Rising U.S. Production
The Thursday release of the latest monthly Organization of the Petroleum Exporting Countries (OPEC) report confirms a major worry in the analytical community: that the cartel's efforts to reduce stockpiles via its output cuts have led, thanks to the resulting higher crude prices, to greater U.S. production - and that this production is growing.
However, the report also reiterates a truism of the free market in that declining production in other nations will do a lot to mitigate the excess output.
OPEC in its report raised its forecast for 2018 non-OPEC supply growth by 160,000 barrels per day (bpd), or 16 percent, to 1.15 million bpd, and it also revised total U.S. crude supply growth higher by 110,000 bpd to 820,000 bpd.
At the same time, the cartel lowered its forecast for demand for its own crude in 2018 to 33.09 million bpd from 33.15 million bpd (although this still exceeds last month's average daily output of 32.42 million bpd).
This is the second month running in which OPEC increased its forecast for rival oil supply growth; but balancing its figures was a high compliance rate of 129 percent with regards to the cartel's cutback strategy in December (meaning, more crude was taken off the market), as well as a drastic decline in production from Venezuela, whose economy has long been teetering on the brink of complete collapse.
The Bolivian republic told OPEC that its output sank by about 216,000 bpd to 1.621 million bpd in December, believed to be the lowest in decades; and while this is significant, Bloomberg gadfly notes a huge discrepancy between Venezuela's number and third party analysis.
The news agency on Thursday pointed out that OPEC publishes two sets of production figures, and the 216,000 bpd drop (about 29 percent) was issued Caracas; by contrast, a consensus figure from secondary sources pegs the drop at 82,000 bpd, or 14 percent.
Bloomberg gadfly suspects the figure from Caracas was manipulated as a result of Major General Manuel Quevedo in November suddenly appointed both oil minister and head of state-oil company Petróleos de Venezuela SA: "new leaders inheriting bad situations have an incentive to kitchen-sink the figures in the hopes of gaining credit for subsequent stabilization."
Indeed, Quevedo appeared on television last weekend claiming production in Venezuela had collapsed to 1.5 million bpd but was already recovering to almost 1.9 million bpd, and critics don't rule out that figure rising still further in January.
But although the discrepancy in reported output illustrates how desperate the Venezuelan government is to convince an increasingly rebellious population that its socialist leaders have everything under control, Bloomberg Gadfly notes that even a midpoint between the two output figures renders the country's compliance level with OPEC's cutback mandates at an astonishing 400 percent.
It added, "Factoring in the wildcards of Libya and Nigeria, OPEC's net cut versus the baseline agreement stood at around 910,000 barrels a day in December. Venezuela accounted for four out of every 10 of them."
Venezuela's ongoing economic woes have been cited by experts such as DNB Bank as one of several wild cards that could lift crude prices to $80 per barrel later this year.
