We expect Venezuelan production to range between 900,000 and 970,000 b/d by mid-2019.

Venezuela’s Crude Oil Production Declines to Accelerate

Several factors indicate that Venezuela’s crude oil production will continue to decline faster than many expect

Venezuela self-reported production of 1.51 million b/d in March in OPEC’s latest Monthly Market report. This is a fall of 77,000 b/d from the previous month, and has fallen 860,000 b/d from its 2016 production averages of 2.37 million b/d.

In addition to falling production, refiners in the United States and Asia have reported crude oil quality issues with imported crude oil from Venezuela, resulting in requests for discounts or discontinuation of purchases. State oil company PDVSA has also been struggling to secure diluents and other chemicals needed to pump crude, keeping its refineries operational and maintaining deteriorating infrastructure. 

We expect woes in Venezuela to worsen in the coming months due to the factors below, and would be selling PDVSA debt at these levels for the reasons below:

– Number of active rigs has fallen 40% to roughly 35 rigs today
– Spiraling debt will continue to hinder capex and cash flow
– Missed payments to oil service companies
– Additional US sanctions on the oil sector