Venezuelan Production Downturn | Russell T. Rudy Energy LLC
The global oil glut has taken its toll on oil prices. Since 2014 the excess of production over consumption has fluctuated from 1-2 million barrels of oil per day (bopd). The response of oil exporting countries to stagnant prices has varied, but Venezuela has been among the least effective in coming to grips with the new reality.
A recent article in “Rigzone” cites a Columbia University study authored by Luisa Palacios, Senior Managing Director at Medley Global Advisors, which found that “It is the underlying trend in Venezuelan crude production that constitutes the most important risk ahead for oil markets.”
Falling oil prices and revenues lead to social unrest and political upheaval, which has in turn given rise to doubts that Venezuela will be able to pay its external debts. This has made oil field service companies unwilling to get involved in projects when there is significant risk that they won’t be paid for their work. This has resulted in falling oil production which in turn has further reduced revenues.
In 2008 Venezuela was producing 3.2 million bopd. By June of this year, it had dropped to 2.36 million bopd, the lowest level since 2003. The official word from the Oil Ministry is that production increased in July, but independent sources report that it declined further.
Economic instability, social unrest, and political instability make investors hesitant to invest in Venezuela. With world-wide capital spending on energy investments significantly curtailed, there is intense competition between countries and projects for the limited funding available. The Columbia University study concludes, “The way the country is adjusting to the oil price collapse is leaving its economy, society and oil industry in much worse shape than its competitors in an oil market where the pool of investable resources has shrunk.”
If current trends continue, Venezuelan output will drop sharply in 2017. While this will help bring the market back into balance and stabilize oil prices, it is certainly not good news for the people of Venezuela.
To read the article in its entirety, please go to http://www.rigzone.com/news/oil_gas/a/146191/Columbia_Univ_Global_Oil_Market_Faces_Less_Venezuela_Supply_In_2017?utm .
Russell T. Rudy Energy, LLC buys oil, gas and mineral interests nationwide. Please call (800-880-0940), or write (info@rudyenergy.com ) to let us know if you agree, disagree or would just like to comment on this, or any of our posts.
