Venezuela Confident on Oil Output Deal, Kilduff Says the Entire Issue is "a Joke"

John Kilduff, founding partner at Again Capital

Following a discussion about market stabilization among delegates at the Non-Aligned Movement in Venezuela, Venezuelan President Nicolas Maduro said Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC members are closing in on an agreement and that he is aiming for a deal to be announced this month.

Hassan Rouhani, president of Iran, who also attended the summit, reiterated an earlier comment that Tehran will support any stabilization effort.

Maduro remarked, "We had a long bilateral meeting with Rouhani; we're close to a deal between OPEC producer countries and non-OPEC."

An increase in oil prices is crucial to Venezuela's collapsing economy, and to that end Eulogio Del Pino, the country's oil minister, told media that "Global production is at 94 million barrels per day, of which we need to go down 9 million barrels per day to sustain the level of consumption."

He added that a "fair price" would be around $70 per barrel.

Whether it was Venezuela announcing yet another imminent breakthrough in market negotiations without going into specifics, or whether fatigue has set in with any mention of the OPEC freeze meeting later this month, the markets did not respond strongly on Monday: West Texas Intermediary briefly traded up to $44.70 and then worked its way down to end at $43.30.

John Kilduff, founding partner at Again Capital, observed, "It's a cliff trade right here; there's more uncertainty than usual in the market because of the upcoming meeting.

"People are waiting for the outcome and a number think this is a good time to stand on the sidelines."

Kilduff also told CNBC that "the Venezuelans are desperate, but the problem they have is the reality that the production from all of them keeps going up and we're about to see a big jump in production once the Libyan situation resolves and the Nigerians get back in line; and the Russians, of all people, will bring 200,000 barrels more to the market by the end of the year.

"So it's just a joke."

When asked where the market will go in the days to come, Kilduff replied, "I think we breach $40 on the way down."

Only three months ago, Maduro took to the airwaves declaring that Venezuela will increase oil production as a result of new quotas set by OPEC, and Del Pino told reporters that "We are not tied to any dogma of reducing production."