Venezuela: Venezuelan oil prices tally highest reading since November
May 13, 2016
In April, the average price of Venezuela’s mix of crude oil rose a healthy 6.3% over the previous month, reaching USD 31.6 per barrel. Average oil prices have crossed the USD 30 threshold for the first time in 2016 and marked the highest reading since November. Despite April’s increase, oil prices continue to hover at historic lows. According to the latest report from the Organization of Petroleum Exporting Countries (OPEC) that was released on 13 May, Venezuelan oil production edged down from 2.31 million barrels per day (mbpd) in March to 2.29 mbpd in April.
Oil prices recovered somewhat in April in spite of a failed meeting between OPEC and Non-OPEC members on 17 April to freeze output. Although oil prices dropped in the aftermath of the meeting, prices rose thereafter due to a series of factors. Heightened geopolitical tensions in the Middle East, supply disruption in key markets, encouraging economic figures from China and a report released by the U.S. Energy Information Agency that U.S. crude production will fall in 2016 and 2017 exerted upward pressure in prices.
The Venezuelan government relies heavily on oil revenues to balance its budget and to meet its international debt 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 more than USD 8.0 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 developments indicate that oil prices will not increase substantially.