Venezuela’s worsening crisis, including power outages crippling its oil sector, present a likely “challenge” to the oil market, the International Energy Agency warned Friday.  In its monthly oil market report, the IEA said Venezuelan output had dropped a further 100,000 b/d in February to 1.14 million b/d, and the country’s oil sector faced an uncertain future.

However, it also said OPEC now had a spare production capacity of 2.8 million b/d, excluding Iran and Venezuela. This spare capacity, created partly by OPEC’s production cuts and with Saudi Arabia accounting for two-thirds of the total, provides a cushion against Venezuela’s crisis, it said.  Russia is among a number of producers able to help make up the shortfall in Venezuelan exports, and has raised its shipments to the US to around 150,000 b/d from previously modest levels, it said.

“Until recently, Venezuela’s oil production had stabilized at around 1.2 million b/d. During the past week, industry operations were seriously disrupted and ongoing losses on a significant scale could present a challenge to the market,” the IEA said.  Much of OPEC’s spare capacity “is composed of crude oil similar in quality to Venezuela’s exports,” the IEA said. “Therefore, in the event of a major loss of supply from Venezuela, the potential means of avoiding serious disruption to the oil market is theoretically at hand.”