Venezuela production rate lowest in 30 years

OPEC has released this month’s Monthly Oil Market Report, outlining the cartel’s assessment of the state of the international oil industry.

Total OPEC production continued to fall in February, extending the group’s recent output decline. The cartel produced 32,186 MBOPD last month, down 77.1 MBOPD from January.

OPEC production has been gradually declining since September, and is now 562 MBOPD lower than when the decline began. This has been driven almost exclusively by Venezuela, where output continues to nose dive.

Lowest production rate in 30 years

The South American producer pumped 1,548 MBOPD in February, 52.4 MBOPD below last month’s production level. According to Bloomberg, the country is producing at the lowest rate since early 1989, almost 30 years ago. The country has seen production drop by almost 24% since the beginning of 2017, a truly drastic decline. With no regime or policy change in sight, it seems likely that Venezuela’s production slide will continue in coming months.

Downward Spiral of Venezuelan Production Helps Keep OPEC Production in Compliance

Source: EnerCom Analytics

Venezuelan rig count down 39%

The EIA also predicts that Venezuelan production will continue to decline. The country has seen a significant, if gradual, decline in active rigs over the past four years. The country averaged almost 70 rigs in Q1 2016, a count that fell to merely 43 rigs in Q4 2017, according to Baker Hughes. Missed payments to service companies, few experienced employees and significant declines in CapEx spending reinforce the expectation of lower production in the future.

Downward Spiral of Venezuelan Production Helps Keep OPEC Production in Compliance

Source: EIA

UAE and Iraq also cut production

Two other countries showed significant production decreases in February, UAE and Iraq, where output declined by 34.3 and 25.5 MBOPD, respectively. These countries are both now producing below their average 2017 output, improving cut compliance.

Nigeria shows only significant growth

The only significant production growth among OPEC countries came from Nigeria, which added 24.9 MBOPD in February. The country reversed most of the decline seen last month, and is now producing just above 1.8 MMBOPD. This was the country’s target production level when it was attempting to recover from unrest in late 2016, and in recent months it has hovered near this target. Like Libya, Nigeria is not subject to the production cuts. It remains to be seen if Nigeria will voluntarily hold its production at around 1.8 MMBOPD or if it will significantly boost output.

In total, OPEC countries subject to the cut agreement saw production decrease by 107.4 MBOPD, further increasing already impressive compliance.

Downward Spiral of Venezuelan Production Helps Keep OPEC Production in Compliance

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