Venezuela calls for more oil production
There is more uncertainty on the oil markets, where a barrel of oil still costs less than 50 dollars. Last week Venezuela made a call to OPEC, the cartel of oil-exporting countries, to reduce its production ceiling. Under the impulse of Saudi Arabia, this organization has chosen to maintain its market share, instead of trying to obtain higher price levels. Most OPEC members are willing to accept the low prices as long as they can maintain their market share but. But according to Venezuela this strategy is doomed to fail, and the price of a barrel of crude oil could,according to the Venezuelans, fall back to $ 20 a barrel if OPEC doesn’t change its strategy. OPEC itself nevertheless stubbornly believes in this strategy.
There is shortly to be a meeting of the members of OPEC, but most analysts expect nothing will change. According to some analysts the bottom may nit yet even have been reached, and a barrel of crude oil could become even cheaper in the months ahead. Goldman Sachs doesn’t exclude oil prices falling back towards $ 20 a barrel (which is what the Venezuelans also believe), partly because of the large stocks of crude oil still available on the market. Cheap oil of course puts the profits of the oil companies under pressure, and those companies in turn invest less in exploration and exploitation. Countries with large oil reserves, such as Venezuela, are the main victims.
Venezuela is of course not the only victim of the cheap oil prices. Russia is also squeezed economically because of the situation on the oil market. The Russians are confronted with a lot of problems. As a result of the sanctions imposed by the Western countries, the country is excluded from capital markets. The conflict in Ukraine still is not solved and Russia is also involved in the war in Syria. The low oil price means bad news for Russia, because the country is heavily dependent on the export of energy. It doesn’t seem that Russia can expect better economic times in the near or medium term. Sergey Narkevich, analyst at Promsvyazbank PAO, fears that the economy will suffer even more if the oil price drops below $ 30 a barrel. | 03/12/2015 | Jos Sterk