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Venezuela crisis can cause power vacuum in OPEC

January 28, 2019/ 08:10

Baku. The ongoing crisis in Venezuela can cause power vacuum in OPEC, Cyril Widdershoven, a Middle East geopolitical specialist and energy analyst, a partner at Dutch risk consultancy VEROCY and SVP MEA-Risk.

"The current OPEC+ production agreement is not going to be affected directly. However, it should not be underestimated that Venezuela is currently leading OPEC. The current power vacuum will have its effect. Also, the possible removal of Maduro will decrease position of Iran and others, as they always have been backing Iran," he said.

Widdershoven believes that the current and continuing instability in the country will keep 1. Compliance of OPEC production cuts at high levels. 2. Keep out the possible production and exports of Venezuela. 3. Will destabilize part of the market, as there is a growing need for medium to heavy crudes, of which Venezuela and Iran are major suppliers. Both are not out of the market. 4. It will put pressure on shale oil, as it will constrain putting light shale oil volumes into existing refineries outside of the USA.

It will take a while to get Venezuelan oil again back on the market, according to the expert.

"A possible government change could reopen the country’s position in the market, however, until now destabilization is high, without any real results yet. At the same time, the country has been mismanaging its oil production, volumes are constrained by wrong technical production approach. Also, appetite to invest in the country will be for long period still very low," he said.

Widdershoven pointed put that in the foreseeable future more volumes will still be out, told Trend

"Production at present is less than 1.2 million bpd, which is very low. Possible increases will take 1-3 years to materialize, if even the case. Still, more stability in the country will have a positive effect on market. At same time, Maduro is not yet out. Power play is not over, so situation is very diffuse."

Venezuela is embroiled in fast-moving political crisis, after an opposition leader stood in the streets of Caracas on Jan.23 and declared himself as the rightful interim president.

A flurry of world powers, including the US, immediately backed Juan Guaido, prompting a furious response from President Nicolas Maduro.

The socialist leader broke diplomatic ties with President Donald Trump's administration on Wednesday, ordering all U.S. diplomatic personnel to leave the country within 72 hours.

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