Oil Futures: Venezuela on electricity crisis impacts oil market
March 15, 2019 | Friday
On Friday, the International Energy Agency (IEA) warns the oil market regarding the nationwide electric crisis in Venezuela. It says it could trigger "serious disruption" to the whole oil market. However, Saudi Arabia, OPEC kingpin have the means to counteract further production issues in Caracas.
Furthermore, the reports from the IEA enters as Venezuela, considered home to the biggest oil reserves worldwide, is at the midpoint of the Western's unfavorable humanitarian crisis.
Elsewhere, on Friday, a Paris-based group who closely watches on the report said, “The electricity crisis in Venezuela has paralyzed most of the country for significant periods of time.” And added, “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… During the past week, industry operations were seriously disrupted, and ongoing losses on a significant scale could present a challenge to the market.”
Last week Thursday, failure at the Guri hydropower plant dived major countries of South America into darkness for days. Subsequently, the blackout impacts the OPEC member oil exports. That of which leaves millions of citizens to struggle to look for food and water.
On Tuesday, the electricity was restored on most of Venezuela. However, there are still areas within oil-rich, yet cash-poor areas which don't restore its electricity. Currently, it is broadly expected that usual electric services may not come back for weeks and worst possible, for months.
The domestic electricity supply in Venezuela mainly depends on its hydroelectric infrastructure than its oil reserves. However, the blackouts and water deficit come more often in recent years. That was upon the sustaining period of its economic mismanagement.
Recently, according to IEA Venezuela's oil production stabilizes at about 1.2 million barrels a day. That was the size of output cuts agreed with OPEC countries and other non-OPEC producers.
Moreover, IEA said that because of the cuts, OPEC is sitting on about 2.8 million barrels a day. That was effective extra production capacity with Saudi Arabia as its de facto leader having two-thirds of it.
According to OPEC, “Much of this spare capacity is composed of crude oil similar in quality to Venezuela’s exports." OPEC added, “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.”
Elsewhere, international benchmark Brent crude is at trade amount of $67.43 on Friday morning. That was an increase of 0.3 percent. At the same time, the United States West Texas Intermediate (WTI) went up amounting to $58.76, a 0.25 percent incline.