Oil prices are in a deep funk, and with COVID-19 depressing demand for gasoline and diesel, it doesn't look like the situation for energy companies will improve anytime soon.

This is very bad news for Venezuela.  

As our friends at OilPrice.com report, futures prices on West Texas Immediate Crude Oil fell another 7.7% today, crashing to about $23 a barrel, and adding to a slump in prices that are now down 63% from early January. Even at these low prices, though -- near the lowest we've seen in five years -- there's little demand for oil in global markets.

Stacked barrels of oil

Image source: Getty Images.

As a consequence, Venezuela is sitting on an oil stockpile 30.9 million barrels high, "but no one to buy them," says OilPrice. Venezuela is therefore making the logical choice and curtailing production. Only 464,000 barrels a day got pumped last week, a 38% reduction from February production rates, and some oilwells are now being closed down entirely.

And here's another problem: Venezuela depends on oil sales to provide 98% of its export earnings. The combination of lessened production, weak demand for oil, and low prices even where demand is present, means significantly lower foreign currency earnings for the country's damaged economy -- which will necessarily mean less money to invest in exploration for greater production in the future, or even for maintaining the ability to produce at current rates.

On the bright side, this vicious cycle of weak demand begetting weak prices begetting weak production may help to reduce global oil supplies so that prices can recover faster -- enabling other countries, and other oil companies to profit. The bad news, though, is that this may not happen fast enough to save Venezuela's economy.