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.


Oil prices rise as faith in supply cuts grows

Updated 44 min 29 sec ago

Oil prices rise as faith in supply cuts grows

  • Producers are following through on commitments to cut supplies as fuel demand picks up with coronavirus restrictions easing
  • OPEC+ countries are due to meet again in early June to discuss maintaining their supply cuts to shore up prices

NEW YORK: Oil prices rose on Tuesday, supported by growing confidence that producers are following through on commitments to cut supplies and as fuel demand picks up with coronavirus restrictions easing.
Brent crude futures were up 45 cents, or 1.3%, at $35.98 a barrel by 1:09 p.m. EDT (1709 GMT). US West Texas Intermediate (WTI) crude futures gained 89 cents, or 2.7%, to $34.14.
The Organization of the Petroleum Exporting Countries and other leading oil producers including Russia, a group known as OPEC+, agreed last month to cut their combined output by almost 10 million barrels per day in May-June to shore up prices and demand, which has been hit by the coronavirus pandemic.
Russian Energy Minister Alexander Novak is due to meet oil major producers on Tuesday to discuss the possible extension of the current level of cuts beyond June, sources familiar with the plans told Reuters.
The RIA news agency said Russian oil production volumes were near the country’s target of 8.5 million bpd for May and June.
On Monday, Russia’s energy ministry quoted Novak as saying that a rise in fuel demand should help to cut a global surplus of about 7 million to 12 million bpd by June or July.
OPEC+ countries are due to meet again in early June to discuss maintaining their supply cuts to shore up prices, which are still down about 45% since the start of the year.
“The 16 million bpd oversupply in crude during April could be reversed altogether by June, helped by a 4 million-bpd recovery in crude demand and a 12 million-bpd cut in crude supply,” said Bjornar Tonhaugen, head of oil markets for Rystad Energy.
“OPEC+ is pulling the most weight by far, effectively reducing supply by nearly 9 million bpd while non-OPEC+ crude supply is down by more than 3.5 million bpd from March levels.”
In an indication of lower supply in the future, data from energy services business Baker Hughes showed that the US rig count hit a record low of 318 last week.