Venezuela: Downward spiral in Venezuelan oil prices continues in November
December 1, 2014
In November, the average price of Venezuela’s mix of crude oil fell a sharp 11.1% over the previous month to USD 70.2 per barrel, which represented the lowest price since September 2010. The monthly drop, which followed the 11.6% decrease recorded in October, mainly reflected a strong U.S. dollar, ample availability of oil in the international markets and weakening global economic growth. The Organization of Petroleum Exporting Countries’ (OPEC) decision not to cut oil production in order to prop up prices also negatively affected prices in late November.
According to the latest report from OPEC, Venezuelan oil production reached 2.33 million barrels per day (mbpd) in October, which was unchanged from the 2.33 mbpd tallied in September.
The sharp decline in oil prices along with OPEC’s decision not to trim down oil production are set to weigh on an already battered Venezuelan economy and further damage government finances. According to analysts, the country loses USD 700 million a year for every USD 1 dollar decline in oil prices. This situation has triggered concerns that without sufficient funds from oil revenues the country could enter into default next year. That said, Venezuela still has maneuvering room as the government can tap into cash reserves allocated outside of the budget.