Industry Trend Analysis - Venezuelan Setbacks Will Benefit Neighbouring Exporters - DEC 2017

BMI View: Financial and supply-related uncertainties will reduce Venezuelan crude ex ports to the US over Q417, undercutting a key source of revenue for state-owned PdVSA. Neighbouring heavy crude exporters Mexico, Ecuador and Colombia are likely to fill the void.

Prolonged above-ground woes are undercutting Venezuela's key oil export sector. Crude output has fallen sharply over the last two years in the face of low oil prices and unsustainable public spending plans. Preliminary OPEC data for September shows production fell below 1.9mn b/d for the first time in over 25 years, compared to 2.1mn b/d in 2016 and nearly 2.4mn b/d in 2015.

State-owned PdVSA will continue to hold back spending to prepare for its forthcoming USD3.5bn debt repayments in October and November, limiting investment into the upstream. We therefore expect further output declines through the remainder of 2017, with production expected to average 1.95mn b/d this year versus 2.16mn b/d in 2016.

Fruther Declines Ahead
Venezuela - Crude Production, 000b/d
Note: Sep-Dec 2017 = BMI forecast. Source: OPEC, BMI

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