Crude supplies from Venezuela are at risk of falling sharply and becoming a challenge for the world’s oil market, the International Energy Agency (IEA) warns in its monthly report.
The power crisis in the South American country that disrupted crude exports this week could return or worsen, threatening 1.2 million barrels per day (bpd) of oil supplies, or more than one-percent 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.
A blackout hit Venezuela on March 7, as national electricity supplier Corpoelec reported “sabotage” at a major hydroelectric power plant called Guri. Power outages have been reported in 21 of the 23 Venezuelan states. On Tuesday, Venezuelan Minister of Communication and Information Jorge Rodriguez said that operations of the country’s power grid have almost fully resumed nationwide.
The IEA report noted that until recently, Venezuela’s oil production had stabilized at around 1.2 million bpd. “During the past week, industry operations were seriously disrupted and ongoing losses on a significant scale could present a challenge to the market. As it happens, 1.2 million bpd is also the size of the output cuts agreed by OPEC countries and some non-OPEC producers.”
The IEA added that, due to the cuts, OPEC members were sitting on approximately 2.8 million bpd of effective spare production capacity, with de-facto leader Saudi Arabia holding two-thirds of it.
“Much of this spare capacity is composed of crude oil similar in quality to Venezuela’s exports,” it 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.”
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