Crude prices are down more than 25 percent in the past 12 months, despite a sharp bounce from their February lows, and the pain is expected to continue in Venezuela. IPD Latin America, a U.S.-based energy consulting firm, gave a “pessimistic scenario” Tuesday for Venezuela’s oil output to decrease to an average of 2.35 million barrels per day this year. The firm’s previous estimate was 2.62 million barrels.
“Our original forecast for 2016 annual production of 2.62 mmb/d could still be achieved with an oil price hike in the 70-80 US$/bbl range during the second half of the year,” the firm said in a release. U.S. crude traded near $44 a barrel Wednesday, and some market watchers see it near a peak.
On the political front, opponents of President Nicolas Maduro won control of the legislature last from the ruling Socialists for the first time in 16 years. But the newly elected majority, as well as the sitting president, have struggled mightily to contend with the country’s economic struggles, trying everything from raising the minimum wage by to cutting the work week to four days in order to save electricity. Late last month, Maduro ordered public employees to work only two days a week because of drought and an electricity shortage.
“I think we could be at a breaking point,” Marczak said. “I think it’s important to pay attention to what’s going on in Venezuela.”