Supply strain pushes oil to $80 a barrel

Brent crude’s price edged closer to $80 a barrel as fears deepened that the supply slump experienced by Venezuela and Iran could worsen.

This is in spite of yesterday’s news that Venezuela’s oil crunch could be alleviated by a surprise about-turn by the government of Nicolas Madura who is said to be considering privatising the beleaguered country’s oil fields.

Private drilling in the South American country came to a halt in the 90s when former president Hugo Chavez nationalised Venezuela’s oil industry.

Since then Petróleos de Venezuela has been the country’s only producer of oil.

Should re-privatisation of Venezuela’s oil fields go ahead, it could result in an immediate foreign direct investment of $430m and an additional injection of 641 000 barrels per day into the international market.

But as the world awaits word from Caracas, strained supply continues, heralding the lowest output from Venezuela in decades.

And in Iran the pressure of US sanctions against that country is adding to the throttling effect of global oil supply.

Meanwhile the International Energy Agency (IEA) has “warned that oil prices could break out above $80 a barrel unless other producers act to offset deepening supply losses in Iran and Venezuela”.

OPEC countries and allies such as Russia have pledged to boost supply - and last month Saudi Arabia brought relief by pushing its output from 70 000 barrels a day to 10.42 million.

However, the IEA told Bloomberg it was still falling short of the 11 million barrels a day required to avoid prices topping $80 a barrel.

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