Americas News
We are Destroying the Price of Crude, Says Venezuela, Who Warns on $20/bbl Oil
Venezuela's oil minister says the price of crude is being destroyed, and unless the Organization of Petroleum Exporting Countries (OPEC) reduces its output soon, oil prices may plummet to the low-to-mid $20s per barrel, Reuters reports.
Based on recent trends in the bunker price/crude relationship, $20 crude could sink IFO380 in major ports to under $100 per metric tonne (pmt).
Speaking at the Gas Exporting Countries Forum in Tehran, Eulogio del Pino warned, "The principles of OPEC were to act on the price of the crude oil, and we need to go back to the principles of OPEC."
He added that considering low oil prices would affect future investment, his nation wants OPEC to adopt an "equilibrium price" that covers new production capacity investment costs – which Saudi Arabia and Qatar are considering at $88 per barrel.
Del Pino urged OPEC to "do something very soon" and said he wants to avoid any further low price/high price cycles.
"It is not good for consumers or producers. We need to send to the market a signal of stabilization, and that signal of stabilization is not what we are doing now," he said.
"We are destroying the price of crude oil; the speculative market is the one that is controlling the market."
In a report released in September, Goldman Sachs echoed Del Pino's concerns.
"While we are increasingly convinced that the market needs to see lower oil prices for longer to achieve a production cut, the source of this production decline and its forcing mechanism is growing more uncertain, raising the possibility that we may ultimately clear at a sharply lower price with cash costs around $20 per barrel Brent prices," it said.
In October while announcing its 2016 budget, Venezuela said it has set the target export price for its oil at $40 per barrel, less than half of the $88 per barrel Venezuelan President Nicolas Maduro believes it needs to be.
