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Opec+ unlikely to change policy on Venezuela’s return

Oil production in Oman rose very slightly in Q2, but prices and oil-related activity fell Pexels/Istiaque Hossain
Venezuela's production has been rising slowly in the last two years, Opec figures show

An easing of US oil sanctions on Opec member Venezuela is unlikely to require any policy changes by the Opec+ producer group for the time being as a recovery in production is likely to be gradual, Opec+  sources told Reuters.

Opec+’s attitude towards the easing of sanctions means the group, which produces over 40 percent of the world’s oil, does not expect any significant price reaction from the move even as Washington seeks ways to alleviate rising global oil prices and supply concerns related to conflict in the Middle East.

The Biden administration on Wednesday broadly eased sanctions on Venezuela’s oil sector in response to a deal reached between the government and opposition parties for the 2024 election – the most extensive rollback of Trump-era restrictions on Caracas.

Oil output in Venezuela, one of Opec’s founding members, has slumped since the US began imposing sanctions on its oil industry in 2017, exacerbating an earlier decline. A rapid recovery is not expected by the Opec+ sources, despite the sanctions being eased.

“Let’s see the level of production to be added,” said an Opec+ source. “Maybe it will be small quantities, so then we are unlikely to see a policy change.”

Another Opec+ source said the production recovery will likely be gradual and there would be no impact on Opec+ policy in the short term. “Excellent news for Venezuela,” said a third.

Venezuela’s production has been rising slowly in the last two years, Opec figures show, although at 733,000 barrels per day in September it remains a fraction of the 2.4 million bpd the country produced in 2016.

Together with Iran and Libya, Venezuela is one of the Opec members exempt from making supply cuts by the wider Opec+ group due to internal or external challenges on their production. A fourth Opec source said this would remain the case.

Francisco Monaldi, a Latin American energy expert with Rice University’s Baker Institute, said Venezuela’s output was expected to grow by between 170,000 and 200,000 bpd in the next two years, fueled by larger output by joint ventures with foreign companies.

The country needs a long list of items to once again become a relevant oil exporter, analysts say, including dozens of drilling rigs, billions of dollars in infrastructure replacements for refineries, flow stations and crude upgraders and a reliable power supply.