Venezuela is reportedly weighing exit from OPEC and has discussed the option
with US officials, though no final decision has been made. The country is not
currently subject to OPEC production limits after a sharp output decline, so a
withdrawal is unlikely to have a large direct impact on global crude supply.
Markets should note, however, the potential for the move to raise doubts about
Saudi-led OPEC’s cohesion and its price-setting ability. Some US officials
envisage a US–Venezuela energy partnership to build an “oil power” that would
weaken OPEC; exempting Venezuela from future quotas could allow it to increase
output over time and put downward pressure on prices. The US would also be
positioned to advance plans on Venezuelan oil and to facilitate greater roles
for international oil companies in rebuilding Venezuela’s industry, a
development that could add to institutional forecasts of a global oil surplus
over the coming years.
