By Trend
If government change actually happens in Venezuela, it will take
time before a new government takes control, makes changes and
reorganizes the oil sector to the extent that there is significant
recovery in Venezuelan oil exports this year, Charles Ellinas, CEO
of Cyprus-based energy consultancy e-CNHC told Trend.
He was commenting on the political crisis in Venezuela and its
possible impact on the world oil market.
Venezuela is embroiled in fast-moving political crisis, after an
opposition leader stood in the streets of Caracas on Jan.23 and
declared himself as the rightful interim president.
A flurry of world powers, including the US, immediately backed
Juan Guaido, prompting a furious response from President Nicolas
Maduro.
The socialist leader broke diplomatic ties with President Donald
Trump's administration on Jan.23, ordering all U.S. diplomatic
personnel to leave the country within 72 hours.
He believes that anyway, the US will carry on with shale oil
development irrespective. "The only factor that can slow this down
is low oil prices, which, with OPEC+ cuts and Iran sanctions, as
well as a slower growth in the Chinese and global economies, is not
on the cards."
He went on to add that the impact of the ongoing developments in
Venezuela on the oil market so far the impact has been small.
"There is some way to go yet before the political situation
becomes clearer. The current President, Maduro, is not in a hurry
to get out and the army is supporting him. Without army support
Guaido cannot do much even after recognition from the west.
Venezuela's oil production has been declining. It was 1.2 million
b/d in December. The average in 2017 was over 1.9 million b/d.
However, if the US proceeds and applies sanctions then the decline
in oil exports may become more significant and may have an impact
later in the year," said Ellinas.
He reiterated that there has not been government change yet and
it may take time before this happens.
"Given the low and declining oil exports from Venezuela, the
impact on OPEC is not major. This year the key developments to
affect the oil price are: a) What happens with Iran sanctions and
the wavers the US granted. If these are not renewed then it will
impact the oil price. b) OPEC+ cuts. These seem to be effective so
far and should keep the oil price above $60/d. d) US shale oil
production. Indications are that this will increase further this
years. In effect it counter-balances the decline in Venezuelan oil
exports. Given the rate of decline during the last two years, the
latter may decline by over 300,000 b/d in 2019, even without regime
change and faster if US applies sanctions.
It appears that the oil market has been discounting the ups and
downs of Libya and Venezuela."
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