New York (CNN Business)Venezuela’s oil industry is at risk of collapsing due the problems with the economy and power grid, according to the International Energy Agency.
“Although there are signs that the situation [with electricity] is improving, the degradation of the power system is such that we cannot be sure if the fixes are durable,” said the agency, a watchdog for western oil consuming countries, in a post on its site Friday. Much of the country was without power for much of the last week. The embattled government of Nicolas Maduro said Thursday the power had been restored, but there were still reports of outages.Venezuela produces about 1.2 million barrels of oil a day when operating normally, said the IEA. But the agency said there are a number of factors that could blunt the i the loss of Venezuelan oil on the global oil market.First and foremost is the cut in production agreed to by OPEC and some non-OPEC countries, which also equals 1.2 million barrels a day.Read More”Much of this spare capacity is composed of crude oil similar in quality to Venezuela’s exports,” said the agency. “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.”In addition, the signs of a slowdown in the global economy could cut demand for oil, according to IEA. And the trend of expanding exports from Canada and the United States could also fill part of the gap.In a bid to force Maduro to leave office, the United States slapped sanctions on Venezuela and its national oil industry in January, blocking exports of its oil to US customers.The sanctions are having another impact on the Venezuelan oil industry, which gets most of its naphtha from the United States. Its supply of the liquid hydrocarbon mixture, used to dilute crude, has been cut off. Without it, Venezuela’s heavy crude can’t be readily transported. Rystad Energy forecasts that some operators in Venezuela will run out of naphtha by this month.– CNN Business’ Matt Egan contributed to this story