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As Venezuela’s crude oil production continues to decline, a co-member from OPEC is stepping in to fill the gap, Reuters reports, citing industry and OPEC sources. This year, daily production is set to fall by at least 250,000 barrels and next year the pace of decline may accelerate, reaching 300,000 bpd. The monthly rate of decline this year has been 20,000 bpd.
As a result, Venezuela is unable to maintain its production quota under OPEC rules—and Iraq, which produces heavy oil similar to Venezuela’s grade, has increased its shipments to some key former-Venezuelan clients, including India and the United States. Heavy Canadian oil is also replacing Venezuelan crude, Reuters data has shown.
Since the start of the year, Iraq has increased its heavy crude exports to India by some 80,000 bpd, while Venezuelan shipments to India fell by 84,000 bpd. Iraq has also raised its crude oil shipments to the U.S., to 201,000 bpd more in the first ten months of the year. In the same period, Venezuelan cargoes to the U.S. fell by 90,000 bpd.
Last month, oil production in Venezuela fell to the lowest in almost three decades, and it looks like the trend will continue as state coffers empty and the recession deepens. State-owned PDVSA simply has no access to fresh funds to finance the drilling of new wells, the maintenance of existing oil fields, or the operation of oil transport infrastructure.
One OPEC source told Reuters that this trend will be good for the market as it would hasten the rebalancing. The source even suggested that the production decline in Venezuela could help keep Brent above US$60 for longer, although there are headwinds emerging for oil prices: there is growing worry that Saudi Arabia won’t be able to get everyone on board with another production cut extension.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.