Venezuela has found its oil production has plunged to alarmingly-low levels.
Just when most countries in the Organization of Petroleum Exporting Countries (OPEC) are ramping up oil output, Venezuela produced just 2.15 million barrels of crude oil per day in June, according to S&P Global Platts estimates, or the weakest pace since February 2003, Platts said.
Venezuela's shrinking oil production is a reflection of the country's grim financial situation, which has caused rolling blackouts that have even left oil facilities in the dark. And because of how critical oil is to Venezuela's economy -- oil accounts for 96% of exports -- the declines threaten to exacerbate the already-dire situation, where a severe food shortage has led to waves of looting.
An internal report by PDVSA, Venezuela's state-owned and scandal-plagued oil giant, also showed a "steep fall" in oil output, Platts said.
OPEC numbers released on Tuesday paint a similar story. The oil cartel estimates Venezuela's production fell to 2.1 million barrels per day in June, making it the only country other than Iraq to dial back production last month. OPEC as a whole increased output by 1%, led by Iran, Nigeria and Saudi Arabia.
Venezuela was pumping as much as three million barrels a day in 2009 and 2.4 million last year, according to the International Energy Agency.
Venezuela is pumping less oil than any time in the last 13 years in part due to failure to invest. Analysts have long warned that Venezuela wasn't investing enough money into its oil industry. That's a problem because oilfields naturally deteriorate over time, and so do the facilities that service the fields. These issues were masked by high prices. But with crude oil prices down by 50% from two years ago the issues are being amplified.
Platts also said Venezuela's oil sector is experiencing power rationing, which is "exacerbating" recent production declines. Venezuela has long suffered from power problems and the government recently instituted rolling blackouts. The country blames record-low water levels at a key dam, though opposition figures point to chronic corruption and mismanagement.
Worse, costs are skyrocketing. Venezuela is grappling with incredible inflation north of 500% as a result of the country's plummeting currency. That means oil companies and suppliers are left with higher costs than they can deal with right now. It's impacting other companies as well.
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