Venezuela: Oil prices stable in January
February 9, 2017
In January, the average price of Venezuela’s mix of crude oil rose 0.5% from the previous month to USD 45.1 per barrel (pb) (December: USD 44.9 pb). January’s print marks a notable improvement from the multi-year low of USD 24.3 pb observed in February 2015 and the highest print since July 2015.
Global oil prices have remained broadly stable in January because lower production was offset by growing indications that U.S. shale producers are to resume operations. Since mid-December, Venezuelan oil prices have traded in a narrow range, a pattern reflected in Brent crude and other oil benchmarks.
The success of the OPEC November output-cap agreement remains to be seen in the coming months since the cartel has a poor track record of complying with production quotas, though countries stuck to their commitment in the first month of the deal. The prospect of fresh sanctions imposed by the United States on Iran, the energy independence plan espoused by Donald Trump and a resumption of shale oil production in the U.S. could jeopardize any price gains.
The agreement is not expected to provide sufficient support to the economy even if it is fulfilled. The latest data from the cash-strapped state-owned oil company PDVSA show that oil production in 2016 dropped by 10% and reached an over 23-year low, with production in 2017 set to remain subdued, suggesting the country will be unable to reap the benefits of higher oil prices. This factor, coupled with conservative forecasts for the evolution of oil prices, suggests that the agreement alone cannot solve the country’s manifold economic problems, including the state-owned enterprise’s multibillion debt coming up for repayment.