Venezuela's Oil Production Drops as Economic Crisis Bites

 

Venezuela's blistering economic crisis, however, is hitting them full on.

 

Output in the country, which has the world's largest oil reserves, dropped to 2.37 million barrels per day in May, according to OPEC data published on Monday.

 

That's down some 5 percent from April and off nearly 11 percent from 2015, adding to the woes of oil-dependent Venezuela as it wrestles with a brutal economic crisis. The drop could also help erode a supply glut that has weighed on prices.

 

Amid a cash crunch, Venezuela's oil fields are suffering from shortages of spare parts, the retreat of oil services companies due to unpaid bills, maintenance issues, and crime, according to workers, union leaders, foreign executives, and industry experts.

 

Oil workers earn only a few dozen dollars a month at the black market rate due to the bolivar currency's rapid tumble on the parallel market, sparking malaise and a brain drain.

 

"Workers' moods are in the dumps," said Francisco Luna, a union leader and technician who works in the oil-producing area of Lake Maracaibo. "Every day it's worse. Maintenance is lacking, equipment is lacking."

 

Officials at state-run oil company PDVSA, the sole operator of the country's oil fields, did not respond to a request for comment.

 

The Caracas-based company has blamed problems on saboteurs and international smear campaigns.

 

As Venezuela's recession appears set to worsen, many wonder how much further output could tumble and whether social issues could eventually encroach on output.

 

Energy consulting firm IPD Latin America caused waves earlier this year when it predicted production could slip to 2.35 million bpd this year, a figure on par with last month's output.

 

Beyond production, Venezuela's refineries and ports have also suffered problems due to equipment failures and power cuts.

 

Supermarket lines and worsening scarcities mean many Venezuelans' lives now revolve around the quest for food, and there has been an increase in worker absenteeism, according to union leaders and foreign executives.

 

Still, Venezuela's economic crisis may provide a silver lining for global oil consumption.

 

"My sense is domestic demand is also lower, so the impact on net exports may be less than the production decline," said Ben Ramsey, an analyst at J.P. Morgan.