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Venezuela’s Crude Oil Production: Bullish Crude Oil Prices

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Venezuela’s crude oil production

Venezuela is OPEC’s sixth-largest crude oil producer. According to the EIA, Venezuela’s crude oil production declined by 35,000 bpd (barrels per day) or 2.1% to 1,605,000 bpd in January 2018—compared to the previous month. Production declined by 395,000 bpd or 20% from a year ago. Production is 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. A fall in Venezuela’s production partly supported crude oil prices.

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Brent crude oil prices and Venezuela’s production

Venezuela’s crude oil production declined 52.3% or by 1,795,000 bpd from its record high in December 1997. Production has fallen by 695,000 bpd or 30% from January 2016 to January 2018. Brent and US crude oil prices advanced ~125% and ~100% during the same period.

The United States Oil ETF (USO) and the United States Brent Oil ETF (BNO) track US and Brent crude oil futures, respectively. These ETFs have increased ~50% and ~74%, respectively, in the last two years.

The Energy Select Sector SPDR Fund (XLE) and the Vanguard Energy ETF (VDE) increased 29% and 28%, respectively, in the last two years. These ETFs have exposure to upstream energy companies.

Impact

Venezuela’s oil minister expects that the country’s production could increase by ~1,000,000 bpd. However, high debt and an economic crisis have led to lower production in the last two years. Energy Aspects estimates that Venezuela’s oil production could drop by 200,000 bpd in 2018. Any fall in Venezuela’s production is bullish for oil prices.

However, the expectation of a rise in production from countries like Canada, the US, and Brazil could offset ongoing supply cuts, which could pressure oil prices.

Next, we’ll discuss Saudi Arabia’s crude oil production.

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