LONDON (ICIS)--OPEC crude production fell 534,000 bbl/day month on month in March to the lowest level since February 2015 as economic turmoil in Venezuela added to the impact of planned supply cuts among member states, the cartel said on Wednesday.
OPEC production fell to 30.02m bbl/day in March, according to secondary estimates quotes in the group’s monthly oil report, amid firming prices and increasing rates of investor speculation in oil futures due to geopolitical tensions and the upcoming summer demand season.
Aside from 324,000 bbl/day cuts during the month compared to February by Saudi Arabia, driven by its commitment to lead the 800,000 bbl/day in production cuts agreed by OPEC member states, the drop was driven by an estimated 289,000 bbl/day fall in Venezuelan production.
Venezuela’s core oil sector has been ravaged by the country’s economic collapse, which has been further exacerbated by the imposition of fresh US sanctions. The country’s total average crude production has fallen from 1.91m bbl/day in 2017 – when it was already in the midst of an economic crisis - to 732,000 bbl/day in March 2019.
The monthly drop in output in the country could have been even higher than the figures in OPEC’s model suggest, with direct communication from Venezeulan oil officials indicating a 472,000 bbl/day collapse in production during the month.
OPEC members agreed 800,000 bbl/day in output cuts from January this year compared to October 2018 levels, with several key non-OPEC states agreeing a further 400,000 bbl/day.
Venezuela, Iran and Libya were exempted from that agreement, but economic woes, US sanctions and military clashes have respectively weighed on output in each country.
Non-OPEC crude supply is also expected to fall year on year in 2019 on the back of extended maintenance in Kazakhstan, Brazil and Canada, while OPEC cut global demand estimates by 30,000 bbl/day month on month to 1.21m bbl/day in its latest oil market report.
Oil pricing continued to rise during the month on the back of stronger market fundamentals, improving market sentiment and the impact of the OPEC production cuts, pushing the cartel’s crude reference basket to the highest levels seen in five months.
Hedge funds and other investors increased their positions in both the ICE Brent and NYMEX WTI crude markets to the highest level since October 2018 in March, on the back of a more balanced global oil market and fears of tightening oil supply in coming months.
OECD commercial oil stocks fell by 18.3m bbl month on month to 2,863m bbl in February, according to preliminary data, but this was 7m bbl higher than the same period a year earlier and 7.5m bbl above the five-year average.
Pictured: The headquarters of Venezuela state oil company Petroleos de Venezuela (PDVSA). Source: Miguel Gutierrez/EPA-EFE/Shutterstock
Additional reporting and infographic by Richard Price