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With most experts anticipating Venezuela's output to further
decline over the next couple of weeks, PDVSA, the country's
state-run oil produce, just announced the addition of a new
subsidiary office in Moscow by next month. The country's oil
minister Manuel Quevedo, who participated in the OPEC+ meeting in
Baku, noted that the country managed to increase its output to
1.432 million bpd in February. There's no doubt that the dialogue
between Caracas and Moscow might produce interesting news for crude
oil trade flows in the near term. Russia is one of the few
countries still recognizing Nicolas Maduro as Venezuela's
president. Meanwhile, PDVSA has been implementing all its
agreements with Russia's top producer Rosneft, according to Mr
Quevedo. PDVSA's outstanding debt to Rosneft stood at USD 2.3
billion at the end of last year, all under crude and oil product
supply agreements. Rosneft doesn't seem to have any concerns around
the probable danger in the Venezuela crisis. According to OPEC's
largest producer, Saudi Arabia, Venezuelan production has already
stabilised this year, with the sanctions imposed by the US on PDVSA
only affecting the direction of their exports. According to Saudi
Arabia's oil minister Falih al-Khalid, more barrels are now heading
to Asia, instead of the US Gulf coast, but with the global market
still absorbing similar volumes of Venezuelan barrels.
However, recent data made available through IHS Markit's Commodities at Sea suggests a
different story. Venezuela has suffered massive losses, with
nothing exported to the US so far this month. Meanwhile, flows to
China and India remain quite strong, but they don't seem to be
enough to maintain the country's exports close to levels seen last
year.
The International Energy Agency (IEA) seems to agree with the
trend observed, highlighting the potential impact that the
Venezuelan collapse could have on the global market. There's no
doubt that OPEC members could step in if needed to provide a
"supply cushion", but this would mean that the US would need the
support of the cartel to avoid any dramatic increase in oil
prices.
IEA is worried that crude supplies from Venezuela could fall
sharply, creating a real "challenge" for the global oil market. The
good scenario would be OPEC members to quickly cover any shortfall,
but we must consider that this situation could support further
increases in oil prices, something that several OPEC members have
been waiting for since 2014. The IEA urges global producers to
think, around 1.2 million bpd of oil supplies have been disrupted.
This accounts for more than one per cent of global output. The
Agency does recognize though, that recently we have observed the
first signs of improvement.
Meanwhile, oil prices hit USD 68 per barrel last week, a
year-high. "A major loss of supply from Venezuela" could mean
serious disruption to the oil market, suggesting "that the market
is tightening".
