Baku, Azerbaijan, May 26
By Leman Zeynalova – Trend:
The arithmetic for a balanced market is far more challenging if Venezuela continues on its rapid decline rate, Simon Flowers, Chairman and Chief Analyst with Wood Mackenzie, said in his analysis.
“That would not only tighten fundamentals, but also make the market even more vulnerable to the potent geopolitical cocktail currently feeding sentiment. It’s a turn of events that would push oil prices higher still, and likely prompt OPEC and Russia to end their production accord,” noted Flowers.
Venezuela’s oil production has already lost millions of barrels per day coming off a 1997 high of over 3 million barrels per day, according to the US Energy Information Administration.
OPEC said in its Monthly Oil Market Report that Venezuela’s February 2018 oil production stood at 1.548 million barrels per day, compared to the 1.916 million barrels per day in 2017, and 2.154 million barrels per day in 2016.
S&P Global Platts said with reference to a source in Venezuela’s oil industry that crude oil production is set to fall further in the coming months, up to another 200,000 barrels per day.
Moreover, the analyst said there is a risk that US sanctions take 0.5 million barrels per day of Iranian exports out of the market by year-end, wiping out the supply ‘cushion’.
“This shifts the outlook for Brent to our ‘Upside risk case’ of $74 per barrel in 2018 (from $69 per barrel) and $70 per barrel ($64 per barrel) in 2019.
US President Trump warned on May 8 that the country will walk away from the nuclear accord of 2015, reached between Tehran and the six world powers. Trump also announced that Washington re-imposes the "highest level of economic sanctions" on the Islamic Republic.
The move has been strongly criticized by other P5+1 members, Moscow, London, Beijing, Paris, Berlin and Brussels, who have confirmed their commitment to the deal.
The agreement was signed on July 14, 2015, and ensured that Iran's nuclear program remains peaceful in exchange for sanctions relief.
OPEC and several other non-OPEC producers reached an agreement to extend the production deal for a further nine months. This would shift the expiration date of the agreement from March to the end of 2018. The agreement is on the same terms as those agreed in November last year.
Earlier, Russian Energy Minister Alexander Novak met with his Saudi counterpart, Khalid Al-Falih, to discuss the deal.
The sides are currently considering a gradual exit to that deal to compensate for falling production in crisis-stricken Venezuela and anticipated export disruption from Iran, which faces renewed US sanctions.
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