Supply of close to 3 million barrels of oil per day might be in jeopardy mainly due to the worsening economic crisis in Venezuela, Citibank said in a report.
Late last year, Venezuela’s government defaulted on millions of dollars’ worth of debt, with larger payments maturing this year. The ability to service billions in debt payments this year is almost certainly out of the question, although the size of the default this year remains to be seen.
The cash crunch that Venezuela has suffered through has worsened substantially over time, and the country’s oil sector has paid the price. Venezuela produced over 3.5 million barrels per day (mb/d) in the late 1990s, but output has been falling for much of the past two decades, although often at a gradual pace. The declines really started to accelerate in the past two years.
But 2018 could be even worse.
A year ago, Venezuela produced between 2.0 and 2.2 mb/d. By the end of 2017, production really began to plunge, dipping to just 1.7 mb/d in December, according to S&P Global Platts.
Citi said Venezuela’s production could fall below 1 million barrels per day, which would essentially be a loss of 700,000 bpd by the end of the year. The losses from Venezuela, combined with potential outages in Iraq, Libya and Nigeria, could reach 3 mb/d in 2018, it said.