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Producers across South America seem to have dominated the
interest of the market recently. From the one side, Venezuelan
crude oil production is set to fall further, if US sanctions remain
in place, and is now expected to reach 750,000 bpd during this
year, down around 560,000 bpd within a year, from around 1.3
million bpd where it stood during 2018. This, however, gives space
for other producers, especially those nearby, to expand their
production and quickly fill the gap. As the political situation in
the Latin American country isn't expected to improve any time soon,
the scene changes quickly, and forecasts suggest that the output of
the region will look rather different within a couple of months.
The trend observed so far is Venezuelan loadings declining rapidly
as shown in the chart below.
The positive scenario would be Venezuelan managing to quickly
improve the political climate which would allow PDVSA to repair the
damage suffered so far. But it looks more likely that the situation
will worsen, with several experts now only expecting the country's
production and exports to collapse. And this could last, if the de
facto ban on US imports of Venezuela crude doesn't change. The
country's oil production has fallen significantly during the last
two years, even before the US sanctions, having reached historical
low levels, at least for this decade.
PDVSA has been struggling to operate wells and other facilities
due to electrical problems across the country, since last week. Oil
wells were halted, with production already stopped at some fields
across the country. The situation has been more difficult in the
west of the country, where lighter grades are pulled from wells.
Output has been less affected in the Orinoco Belt, which represents
over 50 per cent of the country's total production. PDVSA runs
joint ventures with Equinor ASA, Chevron Corp, Total SA, Rosneft
and Repsol SA in this area.
On the other side, Brazil, Colombia and Mexico have been
increasing their output, as the most recent data suggests. Focusing
on Brazil, the country seems to be going through a dynamic
recovery, five years after prosecutors exposed long-running
bribes-for-contracts at state-run oil firm Petrobras. In parallel
to further increasing its exports, the state-controlled oil company
recently announced plans to cut USD 8.1 billion from its
operational costs by 2023. Economy on costs will be mainly based on
reductions in expenses with employees, as the company will launch a
voluntary lay-off plan soon, and with lower expenditures in
advertisement and office spaces. It also plans to sell some mature
oil fields in Brazil.
