Venezuela: Venezuelan oil prices broadly unchanged in February
March 16, 2016
In February, the average price of Venezuela’s mix of crude oil dropped 0.3% over the previous month, remaining broadly unchanged at the USD 24.3 per barrel tallied in January. Thus, oil prices in February fell to another all-time low.
Oil prices have remained largely unchanged from their January level after the government of Venezuela, Saudi Arabia, Qatar, and Non-OPEC member Russia agreed to freeze output at January’s near-record level of production. The announcement, which helped stem the slide in oil prices, has given some relief to oil-producing states. Nevertheless, the ability of the deal to prop prices up remains highly uncertain. Iran, which has entered international markets following years of crippling economic sanctions, is reluctant to abide by the agreement as cutting output would impede potential market share gains. Saudi Arabia, on the other hand, refuses to push through with the agreement if other nations do not abide by it since it would lose market share while Russia seeks unanimous consensus prior to agreeing. Lastly, even if all states cap production at January’s level, a rally in prices is highly unlikely in the short- and medium-term as oil-producing nations will continue producing at near-record levels, offering little hope for stocks to decrease.
According to the latest report from the Organization of Petroleum Exporting Countries (OPEC) that was released on 14 March, Venezuelan oil production increased from 2.32 million barrels per day (mbpd) in January to 2.33 mbpd in February.
The Venezuelan government relies heavily on oil revenues to balance its budget and to meet its international obligations. Oil accounts for about 95% of Venezuela’s exports and more than half of public sector revenues. The plunge in oil prices is putting additional pressure on the country’s finances as USD 8.3 billion in foreign debt payments are due this year alone. While the 2016 budget assumes an oil price of USD 40 per barrel, analysts have pointed out that the government needs a breakeven oil price that is well above USD 100 per barrel and the latest analysis indicates that oil prices will not recover at least until the second half of this year.