There have been no proposals to convene an emergency meeting of the OPEC and non-OPEC monitoring committee because of the political turmoil in Venezuela, OPEC member, Russian Energy Minister Alexander Novak said on Thursday.
Venezuelan opposition leader, Juan Guaido, declared himself interim president on Wednesday, winning the backing of Washington and prompting socialist incumbent Nicolas Maduro, who has led the oil-rich nation since 2013, to sever diplomatic relations with the United States.
Economic crisis under Maduro has decimated Venezuela’s oil industry, cutting its crude output to near 70-year lows around 1.2 million barrels per day (bpd), from double that three years ago.
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Venezuela’s oil is predominantly heavy crude, which requires extensive refining, and as such, is frequently blended with lighter crude to give refiners higher-value products.
With Iran already crippled by U.S. sanctions on its oil, a further drop in Venezuelan exports could squeeze global supply and rapidly push up prices.
“The potential is that the U.S. is starting to put things in motion and the risk for an acceleration in the decline in production from Venezuela is increasing.
For now, it’s not being fully priced in, but I think this does provide a new upside risk for the market,” Petromatrix strategist Olivier Jakob said.
Physical markets around the world have already seen a sharp rise in prices for oil cargoes to reduced supply from OPEC members.
OPEC, together with non-members such as Russia, Kazakhstan and Oman, agreed in December to cut crude output this year by 1.2 million bpd to avoid a build-up in unused inventories, particularly if the global economic outlook darkened.
Concern about the U.S. trade war with China, as well as slower European growth and more fragile emerging economies, has undermined confidence in the oil market in the last few months. (NAN)
