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Venezuela’s Crude Oil Production Is Vital for Oil Bulls

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Venezuela’s crude oil production 

Venezuela is OPEC’s sixth-largest crude oil producer. The EIA estimates that Venezuela’s crude oil production fell by 30,000 bpd (barrels per day) to 1.91 MMbpd (million barrels per day) in October 2017—compared to the previous month. Production fell 1.5% month-over-month and by 180,000 bpd or 8.6% year-over-year. Production was near a 15-year low. Venezuela’s high debt, lack of investment in the oil industry, electricity disruptions, and high inflation pressured the oil production activity. Any fall in Venezuela’s production is bullish for oil (BNO) (USO) (UWT) prices.

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Venezuela’s crude oil production and oil prices 

Venezuela crude oil production fell by 1,460,000 bpd or 43% from its peak in 1998. Production has fallen by 490,000 bpd or 20% in the last two years. The above chart shows that when there was a steep fall in Venezuela’s crude oil production, it supported oil (BNO) (USL) (UCO) prices.

Venezuela’s crude oil production fell by 170,000 bpd or 8.2% in the last 12 months. Brent oil (UWT) (DWT) prices have risen ~30% during this period. Higher oil prices benefit energy producers’ (VDE) (RYE) earnings like Whiting Petroleum (WLL), Saudi Aramco, Rosneft, BP (BP), Marathon Oil (MRO), and Energen (EGN).

Impact   

OPEC estimates that Venezuela’s crude oil production would fall by 250,000 bpd in 2017. The decline could increase to 300,000 bpd in 2018. Any fall in Venezuela’s production is bullish for oil (DTO) (OIL) prices. However, the rise in production from countries like Iraq, Canada, the US, and Brazil are offsetting the losses.

Read Saudi Arabia and Hedge Funds Influence the Crude Oil Market and US Natural Gas Futures Might Continue to Fall Next Week for updates on oil and gas.

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