World oil supply is still stretched despite the restoration of Venezuelan production, and price volatility is likely to continue, according to the February Oil Market Report of the Paris-based International Energy Agency (IEA). ‘The global oil supply and distribution system has been stretched such that it has less margin for error,’ the IEA warned. The agency said that following the strike, it would be some time before spare capacity and stocks were rebuilt. Venezuelan production had recovered to 1.4 million barrels a day (b/d) by early February, compared with 3.4 million before the strike which drove output down to 800,000 b/d in December (MEED 17:1:03). ‘Markedly higher production [by Venezuela] will be difficult to achieve and take longer,’ the IEA predicted. The continued low production by Caracas and stronger-than-expected winter fuel demand is stretching supplies at present, but the continued rise in Venezuelan output compounded by shrinking demand in the second quarter could require rapid and credible OPEC production cuts to prevent a price slump, said the report. ‘The issues then become how easily OPEC reductions are apportioned, how quickly cuts are made and whether compliance with lower targets is observed.’