Caracas seeks Opec extension, new non-Opec joiners
Caracas, 20 March (Argus) — Venezuela wants to extend Opec's six-month output reduction agreement with 11 non-Opec producers into the second half of 2017 and introduce deeper supply cuts by inviting other non-Opec states to voluntarily sign on.
Energy minister Nelson Martinez said the Venezuelan proposal will be discussed at the next meeting of the joint Opec/non-Opec ministerial monitoring committee in Kuwait on 26-27 March.
The meeting in Kuwait will review the status of the current agreement, and the reasons why some Opec and non-Opec producers are not in full compliance with the crude production levels they were individually assigned last December, Martinez said.
Caracas also expects that the five-country monitoring committee that includes Opec members Venezuela, Algeria and Kuwait, and non-Opec producers Russia and Oman, will support its proposal to invite on 27 March all non-Opec producers currently not participating in the six-month deal to join the effort right away, the energy ministry said.
"Our proposal is that on 27 March we should jointly call on other oil producers to join the plan in a voluntary fashion with individual production ceilings set on the basis of their crude output and inventories," Martinez said.
Among the non-Opec countries that chose to stay on the sidelines of the current agreement are Egypt, Congo (Brazzaville), Turkmenistan and Colombia.
In the last week, the Saudis have said they would be agreeable to an extension of the current six-month deal if global oil stocks have not returned to their five-year average or below by mid-year, an increasingly likely scenario. Kuwait has said it would support an extension. Iran has said it would restrain output if others followed suit.
Caracas was an early and active proponent of production restraints, working diplomatic channels in parallel to Algeria.
Venezuela's efforts to extend the Opec/non-Opec output reduction agreement from six months to 12 months and cut output further by inviting more producers to join the scheme reflects growing official concerns in Caracas that rising US shale output will push oil prices lower. The immediate worry is that state-owned oil company PdV could default on up to $2.9bn of debt principal and interest due in April.
Venezuela's average export price for the five-day trading week ending on 17 March was $41.78/bl, down by $3.39/bl from the previous week's average price of $45.17/bl, the energy ministry said.
PdV's 2017 year-to-date average export price as of 17 March was $45.38/bl compared with 2016's full-year average export price of $35.15/bl, the ministry's weekly and monthly price movement figures show.
President Nicolas Maduro's 2017 central government budget is based on an average export price of $40/bl. The government's budget does not include explicit oil production and export estimates. But PdV's 2017 business plan calls for holding crude output at 2.5mn b/d this year, almost the same volume produced in 2016.
Maduro and PdV chief executive Eulogio Del Pino have repeatedly stated since last September that $60-70/bl would be a "fair" price for both oil producers and consumers.
The average price of Venezuela's oil exports, led by 16°API Merey, typically lags average Opec, Brent and WTI prices by $9-11/bl because of their heavier quality.
A Venezuelan central bank economist tells Argus that a $60/bl price would not substantially ease the financial crises afflicting the Maduro government and cash-starved PdV. "Venezuela needs a price of $100/bl at a minimum to start climbing out of the economic recession that has gotten worse every year since Maduro was elected president in April 2013," the economist said.