Venezuela “has been thrust back into the energy spotlight”, says Sam Meredith on CNBC. The “oil-rich but cash-poor” country is in meltdown and the US is threatening further sanctions. The upshot could be “wild swings in the oil price”.
In truth, however, this could prove a fuss about nothing. Venezuela’s oil output has been decreasing for more than two decades. It came down to 1.5 million barrels per day in December, according to data from Trading Economics, falling from its peak of some 3.5 million barrels per day in 1998.
Despite having large reserves, the state refinery’s capacity has declined because of poor maintenance and lack of skilled workers. Equally, Saudi Arabia, Mexico and Iraq produce the same variety of heavy crude oil, and they “have been eating into Venezuela’s market share for years”, says the BBC’s Daniel Gallas. The global oil market depends on several producers, notably the US and Opec, the oil-exporting cartel. These two factors are key to price movements. For now, it seems that output cuts implemented by Opec will be offset by US shale production.
American oil producers have experienced pipeline bottlenecks, but those are set to ease by the end of 2019, says Javier Blas on Bloomberg. US output is expected to surpass 24 million barrels per day over the next six years, according to Reuters. So further falls in Venezuelan output are hardly likely to prove pivotal.