Glimmers of Economic Recovery amid Mixed Reports about Venezuelan Oil Production

Lower levels of oil production have been reportedly offset by rising prices and reduced domestic consumption.

By Cira Pascual Marquina
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Venezuelan state oil company PDVSA has suffered collapsing production levels in recent months
Venezuelan state oil company PDVSA has suffered collapsing production levels in recent months. (Archive)

Caracas, July 19, 2018 (venezuelanalysis.com) – Venezuela’s new oil czar, Manuel Quevedo, said on Saturday that state oil company PDVSA will raise production to 1.9 million barrels per day before the end of the year. Hiking its production by some 400 thousand barrels daily would put Venezuela near to the OPEC quota that it failed to fulfill last year.

"Venezuela, as a founding member of OPEC, is committed to fulfilling to the daily oil production levels established by OPEC plus guidelines," the minister announced via Twitter

Quevedo’s declaration comes amid conflicting information that points to an uncertain but possibly better future for Venezuela's main export industry.

On the one hand, the China Development Bank raised hopes earlier this month with its pledge of a USD$250 million loan to boost production, according to declarations made by Venezuelan Finance minister Simon Zerpa. There is also discussion of a another USD$ five billion loan from China to finance the South American nation’s oil industry.

On the other hand, Venezuela's levels of oil production will likely drop in the short run due to shutdown and maintenance on two of the country’s four crude upgraders, Reuters reports. Oil upgraders are facilities that convert bitumen into synthetic crude oil in a process which is key to Venezuelan operations in the heavy crude-rich Orinoco Belt, home to world’s largest oil reserves.

Although there is much uncertainty and debate about reliable production figures, a Torino Capital report issued this week observes that in recent months a general decline in production has been significantly offset by rising prices and reduced domestic consumption. Sales of crude to the US rose in June, while those to China, India and Singapore have fallen over the course of this year.

Overall, Torino suggests that in 2018 the dollar value of oil sales has recovered somewhat, following a low point in the Venezuelan economy at the end of 2017.

The Venezuelan oil industry has been hard hit by US-led international sanctions that make it difficult to access key inputs while hindering the Caribbean country’s ability to make financial transactions. Additionally, there has been a loss of skilled workers, emigrating from the country, and a bottleneck due to the ConocoPhillips seizure of PDVSA’s Caribbean storage facilities.

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