Oil-rich Venezuela and Russia help ally Cuba, but its energy woes persist

Cuban President Miguel Diaz-Canel, right, and Russian Prime Minister Dmitry Medvedev at a joint press conference at the Revolution Palace in Havana on Thursday. Medvedev was in Cuba for an official visit. (AFP)
Updated 06 October 2019

Oil-rich Venezuela and Russia help ally Cuba, but its energy woes persist

  • Cuba’s oil production currently meets an estimated 40 percent of its needs

HAVANA: A flotilla of shipments from Venezuela gave Cuba some respite this week from crippling fuel shortages in the wake of tougher US sanctions, while Russia’s prime minister pledged during a visit to the island on Friday to help develop its energy sector.

But support from two of its closest allies looks unlikely to resolve Cuba’s energy problems and the government has extended many of the energy-saving measures it had introduced over the past month.

Havana warned on Sept. 11 it had not secured sufficient shipments of refined fuels, such as gasoline and diesel, for the rest of the month due to sanctions imposed by the administration of US President Donald Trump in retaliation for its support for Venezuelan President Nicolas Maduro.

In response to the shortages, Cuba swiftly deepened austerity measures it had introduced since an economic meltdown in Venezuela, its principal supplier, choked off its energy imports.

Cuban authorities cut public transport last month, decreased production at some factories, and encouraged the use of more animal-powered vehicles and wood-fired ovens.

Venezuela responded by increasing oil shipments to its Caribbean ally, despite its own output issues and sanctions-related restrictions.

Since late September, at least eight tankers carrying some 3.83 million barrels of crude and fuel have been shipped from Venezuela, according to Refinitiv Eikon data and internal data from Venezuela’s state-run oil firm PDVSA. That represents a sharp increase from five vessels loaded with 1.98 million barrels during the first half of September.

Following the shipments, there are no longer multi-hour queues at Cuban gas stations for gasoline, although diesel remains elusive.

Transport officials on Wednesday said they would be upping the frequency of train and bus departures, although not yet restoring “normality” following the drastic cuts last month.

President Miguel Diaz-Canel celebrated that Cuba managed to avoid blackouts in September in an editorial in the Communist Party newspaper Granma entitled “No fear of the current juncture.”

The two-day official visit of Russian Prime Minister Dmitry Medvedev, which concluded on Friday, also sent a signal the island is not alone.

Medvedev on Friday visited a horizontal oil well located in the Boca de Jaruco oil field in northern Cuba which is being developed by Russian and Cuban state-run companies Zarubezhneft and Cubapetroleo.

Zarubezhneft plans to drill 30 wells in two years there at a cost of 100 million euros, Russian state-owned news agency Sputnik wrote on Friday.

The two countries are working towards reducing Cuba’s dependence on energy imports by improving its energy efficiency and collaborating on oil exploration, a senior Russian government official told TASS news agency.

However, Medvedev did not announce any short-term measures to provide relief to the island during his visit.

Cuba’s oil production currently meets an estimated 40 percent of its needs. Nearly all the rest has been supplied by Venezuela for years under a barter agreement for Cuban medical services, with some imports from other allies like Algeria and Russia.

However, analysts say Venezuela and Cuba will struggle to keep beating ever-tightening US sanctions.

OPEC+ faces challenge from rivals’ rising output, says IEA

Updated 30 min 36 sec ago

OPEC+ faces challenge from rivals’ rising output, says IEA

  • Sluggish refinery activity in the first three quarters has caused crude oil demand to fall for first time in a decade

LONDON: OPEC and its allies face stiffening competition in 2020, the International Energy Agency said on Friday, adding urgency to the oil producer group’s policy meeting next month.

“The OPEC+ countries face a major challenge in 2020 as demand for their crude is expected to fall sharply,” the Paris-based agency said in a monthly report.

The IEA estimated non-OPEC supply growth would surge to
2.3 million barrels per day (bpd) next year compared with 1.8 million bpd in 2019, citing production from the US, Brazil, Norway and Guyana.

“The hefty supply cushion that is likely to build up during the first half of next year will offer cold comfort to OPEC+ ministers gathering in Vienna at the start of next month,” it added.

While US supply rose by 145,000 bpd in October, the IEA said, a slowdown in activity that started earlier this year looks set to continue as companies prioritize capital discipline.

Demand for crude oil from OPEC in 2020 will be 28.9 million bpd, the IEA forecast, 1 million bpd below the exporter club’s current production.

The recovery by Saudi Arabia from attacks on the country’s oil infrastructure contributed 1.4 million bpd to the global oil supply increase in October of 1.5 million bpd.

Saudi state oil company Aramco, the world’s most profitable firm, starts a share sale on Nov. 17 in an initial public offering that may raise between $20 billion and
$40 billion.

It was the IEA’s last monthly report before the Dec. 5-6 talks among OPEC states and partners led by Russia on whether to maintain supply curbs aimed at buoying prices and balancing the market.

The agency kept its assessments for growth in global oil demand in 2019 and 2020 at 1 million bpd and 1.2 million bpd respectively, but said its outlook might slightly underestimate the impact of tariffs from the US-China trade war.

The IEA said that if some or all tariffs were lifted in coming months, “world economic growth and oil demand growth would both rise significantly,” though the rebound may not be immediate.

Sluggish refinery activity in the first three quarters has caused crude oil demand to fall in 2019 for the first time since 2009, the IEA said, but refining is set to rebound sharply in the fourth quarter and in 2020.