World can rely on OPEC supply cushion for urgent oil needs: IEA

Author: 
AFP
ID: 
1552641523832112900
Fri, 2019-03-15 09:07

PARIS: Production cutbacks by OPEC nations are building a supply
cushion that could be called upon to mitigate a possible supply
shock from an abrupt drop in crisis-hit Venezuela’s output, the
IEA said Friday.
With a nationwide blackout that paralyzed the country for one week,
demonstrating the unreliability of the country’s electricity
network, new questions are being raised about Venezuela’s ability
to continue to produce and export oil.
In its latest monthly report, the Paris-based International Energy
Agency said that Venezuela’s oil industry operations were
seriously disrupted by the blackout and warned that “ongoing
losses on a significant scale could present a challenge to the
market.”
Venezuela’s oil output has long been on a downward spiral thanks
to years of underinvestment and mismanagement, with stepped-up US
sanctions further trimming exports.
However the IEA also noted that Venezuela’s current oil
production of about 1.2 million barrels per day (mbd) is the size
of production cuts agreed by members of the OPEC oil cartel and a
number of other nations led by Russia, a grouping often called
OPEC+.
Overall, it said OPEC members have about 2.8 mbd of spare
production capacity, with much of it being similar in quality to
oil produced in Venezuela, which means it could be used without
much, if any, adjustment by refineries.
“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,” said the IEA, adding
that “production cuts have increased the spare capacity
cushion.”
The agency, which advises oil-consuming nations on energy issues,
said that thanks to bigger-than-promised cuts by Saudi Arabia and
its Gulf allies, the OPEC+ effort to trim output was beginning to
work.
Since 2016 the OPEC+ nations have agreed on a series of output
limits in an effort to counteract the collapse of oil prices in
2014 caused by overproduction. After oil prices had a rollercoaster
ride at the end of last year, OPEC+ agreed to cut production by 1.2
mbd in January to June.
The IEA said OPEC+ production was 0.24 mbd above the target of 44.3
mbd, with overall compliance with reduction targets at 80
percent.
“OPEC’s compliance was a robust 94 percent, compared to 51
percent from non-OPEC,” said the IEA, adding that major producer
Russia was continuing to adjust its production gradually.
“If the producers deliver on their promises, the market could
return to balance in the second quarter” of this year, said the
IEA.
The IEA left unchanged its forecast for non-OPEC supply increasing
to 64.4 mbd this year from a revised 62.7 mbd in 2018, a gain of
1.7 mbd.
It left unchanged its forecast for global oil demand growth of 1.4
mbd to an average of 100.6 mbd in 2019.

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OPEC stresses need for 2019 oil supply cuts as rivals pump moreOPEC
stresses need for 2019 oil supply cuts as rivals pump more
Source: FS – All-News-Economy
World can rely on OPEC supply cushion for urgent oil needs: IEA