Venezuela-based oil company, Camimpeg, has reportedly entered into an alliance with the UK-based Southern Procurement Services
Just when The Country Caller was skeptical about further red flags for oil’s future, a recent development coming from Venezuela might just erode gains in the commodity. Venezuela-based military-controlled oil mining company, Camimpeg, has reportedly entered into an alliance with the UK-based Southern Procurement Services (SPS). According to the deal’s terms, the oil wells located in the state of Zulia shall be re-activated. The well count itself could climb to 1,500, which may add to the supply side.
While this deal may favor both the companies in the near term, it can have a disastrous impact on the future of the commodity. The organization of petroleum exporting countries (OPEC) has already accelerated its efforts to curb oil supply, as producers in Saudi Arabia and Qatar have given out dates to initiate crude supply cut. The British company is said to have been approached so as to alleviate the oil production in the Venezuelan fields.
Oil has been a major contributor to Venezuela’s exports, as the commodity constitutes 95% of the total export earnings of the country. However, the region recently recorded its lowest ever production levels in the last 13 years, raising concerns to accelerate output in the region. Venezuela is currently the 11th largest oil producer in the world and any pressure on the supply side will make the situation difficult to handle. We are already witnessing a downward trend in oil prices today, as they continue to tumble below $53.
Even the upcoming year is not expected to be fruitful for oil-dependent economies as prices are expected to remain below $55. The sustainability of OPEC’s accord is another question mark in our view. TCC adheres to its bearish views as we do not see any positive developments coming in, which can help bring stability in the supply glut, while crude demand will also add pressure next year.