Oil's Well That Ends Well

from UPI

June 19 (UPI) -- Ahead of what could be pivotal talks among OPEC members, production from founding member Venezuela could hit new lows soon, an industry report found.

State-backed oil company Petróleos de Venezuela, known commonly as PDVSA, notified 11 of its international customers earlier this month that it wouldn't be able to meet contractual obligations of 1.5 million barrels per day. According to commodity pricing group S&P Global Platts, PDVSA had only 694,000 barrels per day available for shipments.

"As workers have fled the country, state-owned oil company PDVSA has had a difficult time maintaining crude output, let alone boosting production," its report, emailed to UPI on Tuesday, read. "PDVSA's refining sector has also deteriorated on a lack of funds and manpower."

PDVSA is facing mounting obligations to its partners, notably ConocoPhillips. Meanwhile, U.S. sanctions pressures have made it difficult to do business with Venezuelan entities, including PDVSA. A digital currency embraced by President Nicolas Maduro was banned under U.S. actions.

Secondary sources reported to OPEC that Venezuela produced around 1.4 million barrels per day last month, down by more than half a million barrels per day from last year's average. OPEC ministers last this week are expected to decide to put more oil on the market to buffer against the chronic shortages from Venezuela, though the Maduro administration is opposed to those considerations.

Higher oil prices support oil-exporting nations and prices would drop if OPEC decides to make a supply-side move later this week.

According to the International Energy Agency, Venezuelan production could drop to as low as 800,000 barrels per day, though Platts expects output to say above the 1 million barrels per day mark through next year.

The country's rig count, a loose barometer of future production, was 28 last month, down about half from the start of the year.

"PDVSA has experienced similar drops in the past," the Platts report read. "In the 1980s, the number of rigs fell to less than 30, causing crude production to fall to 1.3 million barrels per day."