©Reuters Venezuela’s economic and political woes are set to curtail Opec member’s oil production, adding to a growing list of supply disruptions that are helping to prop up global crude prices. Analysts believe chronic power shortages in the country could soon affect the oil sector, with output declining 100,000-200,000 barrels per day this year. More On this topic IN Emerging Markets Dangerously low water levels at Venezuela’s giant Guri dam — which provides more than a third of the country’s electricity — may also force the country to shut the site to avoid turbine damage, which is likely to hit oil production and could force officials to redirect some oil exports towards electricity supplies and diesel generators. Last week water levels at the dam were 243 metres, with 240 metres the cut-off point. In a bid to save electricity, President Nicolás Maduro recently reversed a half-hour time change that had been a trademark policy of his predecessor Hugo Chávez’s 14 years in power. “We have to consider that Venezuela is less than 20 days away from a major power production disruption,” Olivier Jakob of Petromatrix, a Swiss-based consultancy, wrote in a recent report. “Crude and product production could be negatively impacted and the country might have to increase imports of petroleum products for generators.” Unplanned production outages are picking up among Opec members with oil prices around $40 a barrel. A workers’ strike in Kuwait and pipeline fire in Nigeria have added to the disruptions that analysts estimate stand at almost 2.8m b/d — the highest level in nearly two years. The supply issues have provided a powerful prop for the oil price after some of the world’s leading oil producers failed to agree to freeze production — a deal that Venezuela helped bring to the negotiating table in an effort to prop up its finances. The country’s oil minister Eulogio del Pino has blamed Saudi Arabia for the collapse of the talks, claiming its delegation has “no authority to decide on anything” as they were under strict instructions from Riyadh not to give any ground to Iran, another Opec member. Crude production in Venezuela, which has the biggest oil reserves in the world, according to the BP Statistical Review, is already decreasing. According to Opec March’s report, Venezuela’s oil production dropped to 2.52m b/d in February 2016 from 2.59m b/d in December 2015. Average output in 2015 was 2.65m b/d, down from 2.68m b/d in 2014. While the chronic power shortages may increase domestic consumption of fuels such as diesel, electricity rationing is likely to hit oil production says Francisco Monaldi, a Venezuelan energy expert with the Houston-based Baker Institute for Public Policy A lack of investment, adequate infrastructure and a shrinking cash flow may drag oil output down by 100,000-200,000 b/d in a year, Mr Monaldi estimates. Analysts at IPD Latin America say Venezuela’s output is likely to drop from 2.78m b/d last year to a forecast 2.62m b/d in 2016. “If oil prices remain low, we have a pessimistic scenario where production will continue to fall,” says David Voght, IPD’s managing director. Last week, Schlumberger, the US oilfield services company, announced it was cutting back on some of its activity in Venezuela citing insufficient payments “received in recent quarters and a lack of progress in establishing new mechanisms that address past and future accounts receivable”. Energy consultancy FGE estimates that Schlumberger’s exit from Venezuela, “could leave at least one-fifth of the country’s output exposed to steep declines this year, resulting in output by December dropping by around 150,000 b/d year on year.” Copyright The Financial Times Limited 2016. You may share using our article tools. Please don’t cut articles from FT.com and redistribute by email or post to the web. Source link

©Getty Companies have been big buyers of their own stock for the past few years, helping to boost earnings per share Investors in Russia and Saudi Arabia cut their combined holdings of US securities by more than $50bn between the middle of 2014 and 2015, as the commodity price rout reverberated through global markets. Russian and Saudi Arabian investors sold US stocks and corporate bonds as the price of oil fell and many emerging market currencies — including the rouble — tumbled against the dollar. An annual US Treasury survey released on Tuesday showed that the Gulf country reduced its holdings of US stocks by $26bn to $52.4bn over the year. More On this topic IN Markets Earlier this month the Treasury revealed for the first time the scale of Saudi purchases of US government debt — including by central banks, sovereign wealth funds and residents — which slipped by $3bn to $116.8bn from February to March this year. Brent, the international crude benchmark, has fallen 57 per cent from its 2014 high, and the decline has prompted finance ministers in both countries to seek new funding sources to plug widening budget gaps. Saudi Arabia, the world’s largest oil producer, has lined up banks ahead of an expected $15bn bond sale later this year. Meanwhile, Russia sold $1.75bn worth of debt last week in its first euro deal since sanctions were imposed. Investors in Russia have steadily shed US assets since the financial crisis, with holdings more than halved from a 2008 peak to roughly $73bn by the end of last June. While the report underlined the difficulties facing the two governments, it also underscored the appetite foreign buyers have had for US assets as yields on European and Japanese sovereign debt slid into negative territory. Foreign ownership of US securities reached a record $17.1tn by June 2015, up 4 per cent from a year earlier as investors in the UK, Luxembourg, the Cayman Islands and Ireland added to their holdings. Financial institutions, brokers and custodians responding to the survey reported a $159bn jump in holdings of US assets by UK portfolios, the largest increase last year. Residents of several emerging markets also reported a rise in US security ownership, including Mexico, Brazil, Turkey and India, the Treasury report showed. The Treasury has sought to improve the annual survey, which it characterised as “imperfect” on Tuesday. Ownership can be masked by the purchase of stocks or bonds through a financial intermediary, a point investors note elevates countries such as Belgium in the analysis. eric.platt@ft.com Twitter: @ericgplatt Copyright The Financial Times Limited 2016. You may share using our article tools. Please don’t cut articles from FT.com and redistribute by email or post to the web. Source link