Americas News
Oil Output Freeze a "Victory" for Venezuela But Won't Help an Economy on the "Brink of Collapse"
The multi-nation pact to freeze oil prices last week may have fallen far short of a much hoped-for production slash, but it's still a victory for Eulogio Del Pino, energy minister for Venezuela, his predecessor has told media.
Alirio Parra, former energy minister for Venezuela, told BloombergBusiness that Del Pino spearheaded the lobbying campaign that led to the agreement in principle between Saudi Arabia, Russia, Qatar, and his country: "Without doubt, Venezuela has an important role in these developments."
He added that Del Pino was "very insistent in trying to get some form of agreement, so I think this has gone along the lines that he's been looking for."
Olivier Jakob, managing director of Petromatrix GmbH, said that while it won't "bring back oil prices to $100," Saudi's supposed shift in mindset is a big improvement over its "we don't care" position.
If a February 16 email by Del Pino from national explorer Petroleos de Venezuela SA is any indication, the energy minister thinks there is more to his success than meets the eye of critics, who believe the Saudi/Russia pact will do nothing to improve the global market imbalance.
He stated, "With this historic agreement, Venezuela, a founding OPEC country, assumes once again a unifying role," and he went on to predict that the agreement will restore "the stability of prices in the international market."
Not so, replies Harry Tchilinguirian, the head of commodity markets at BNP Paribas: "Saudi Arabia is paying lip service to Venezuela's efforts after they pushed so intensively for an accord.
"It allows Venezuela a means of saving face."
More importantly, the pact will not save Venezuela's economy, which Business Insider writer Ben Moshinsky describes as being "on the brink of collapse": "Even if oil returned to about $100 a barrel, as it was midway through 2014, the country wouldn't be able to escape its economic hole; it needs double that."
Moshinsky notes that even if the pact resulted in a production freeze at January levels, "That output level is still too high to move prices up; what it really needs is a cut, and a big one at that."
However even that would be ineffective, according to Texas Congressman Joe Barton, who says the U.S. is ready to ramp up production to counter any cuts made by other nations.
A recent Bloomberg report warned that Venezuela will have difficulty meeting its debt obligations and could default as early as this month.
