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OPEC Output Slides as Saudis Deepen Cut, Venezuela Crisis Grows

CommoditiesApr 01, 2019 10:15
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© Bloomberg. A night view of Ameriven oil refinery, one of the four companies at the Jose Complex in Anzoategui state, 200 miles East from Caracas, Venezuela, on Thursday, Sept. 13, 2007. The complex makes refined crude from the heavy oil of the Orinoco Belt, and is a joint venture between Venezuelan state owned PDVSA and the foreign companies Chevron, British Petrolum, Total and Statoil. Photographer: DIEGO GIUDICE/Bloomberg

(Bloomberg) -- OPEC’s crude production slid for a fourth month as Saudi Arabia pressed on with output curbs aimed at balancing global markets, and as an economic crisis in Venezuela escalated.

Despite pressure from U.S. President Donald Trump to keep oil supplies flowing and put a lid on rising prices, the Saudis and other members of the cartel remain resolved to restrain production to avert a glut.

The kingdom slashed production to a four-year low of 9.82 million barrels a day in March, according to a Bloomberg survey of officials, analysts and ship-tracking data. Output from the 14 members of the Organization of Petroleum Exporting Countries fell by 295,000 barrels a day to 30.385 million.

The Saudis and other Gulf producers continue to curb output even as troubles intensify in fellow OPEC nation Venezuela, where a spiraling financial slump -- and the onset of American sanctions -- is battering its oil industry.

At the start of the year, the cartel and its allies -- which include non-members such as Russia and Kazakhstan -- started a new wave of output cuts as a flood of American shale-oil and fragile global fuel demand threatened to tip world markets into surplus.

Their restraint has caused supply to tighten, pushing crude prices 32 percent higher in New York in the first quarter, the commodity’s strongest start to a year since 2002.

Trump Criticism

That drew renewed criticism from President Trump late last month. He took to Twitter for the second time this year to urge OPEC to reverse its policy of cutting production. The group has so far ignored his calls.

The March data indicates that the 11 OPEC members engaged in the accord collectively cut production by about 30 percent more than required.

The extra effort though was almost entirely driven by Saudi Arabia, the group’s biggest member, which decreased output by 280,000 barrels a day to the lowest level since February 2015. The kingdom has cut production by more than double the amount pledged under the December accord.

Saudi Arabia’s commitment is making up for lagging compliance by some members, most notably Nigeria, which is boosting exports as it ramps up operations at a new oilfield, Egina.

At a gathering of OPEC and its allies in the Azeri capital of Baku last month, Nigeria -- along with other errant producers Iraq and Kazakhstan -- was initiated into the committee that oversees implementation of the deal. Saudi Arabian Energy Minister Khalid Al-Falih said he’d been assured that all producers in the agreement would deliver on their promises.

Nigeria Boost

The data for March however indicates Nigeria hasn’t yet mended its ways: the African nation boosted output once again, this time by 90,000 barrels day to a three-year high of 1.92 million a day.

The non-compliance of Nigeria and Iraq is being more than offset by Venezuela, which was exempted from the pact to deliberately decrease supplies because its unplanned losses have been so extreme.

Output in the Latin American nation, which was hit by wide-spread electricity blackouts last month and faces U.S. sanctions on its oil sales, plunged by a further 180,000 barrels a day to 890,000 a day. That’s the lowest since production was essentially paralyzed by a labor strike in 2003.

OPEC Output Slides as Saudis Deepen Cut, Venezuela Crisis Grows
 

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