IEA Warns Venezuela Chaos May ‘Challenge’ Global Oil Market

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(Ft.com, 15.Mar.2019) — The International Energy Agency has warned that crude supplies from Venezuela are at risk of falling sharply and becoming a “challenge” for the global the oil market, indicating it hopes other Opec members will be prepared to help cover any shortfall should the situation deteriorate.

In its monthly market report, the IEA — which advises major oil consuming countries — said a power crisis in Venezuela that disrupted crude exports this week could return or worsen, threatening 1.2m barrels a day of oil supplies or more than 1 per cent of global output.

“Although there are signs that the situation is improving, the degradation of the power system is such that we cannot be sure if the fixes are durable,” the IEA said. “During the past week, industry operations were seriously disrupted and ongoing losses on a significant scale could present a challenge to the market.”

The IEA said the market had a potential “supply cushion”, however, from the fact Saudi Arabia, other Opec members and their allies like Russia have been making production cuts. Oil prices hit a year-high above $68 a barrel on Thursday.

“Much of this spare capacity is composed of crude oil similar in quality to Venezuela’s exports,” the IEA said. “Therefore, in the event of a major loss of supply from Venezuela, the potential means of avoiding serious disruption to the oil market is theoretically at hand.”

The IEA said that before accounting for the situation in Venezuela, which is suffering from a political and economic crisis and the imposition of US sanctions on its energy exports, its supply and demand balances — which it said have not changed “significantly from last month” — suggest “that the market is tightening”.

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