Venezuela Hopeful that OPEC Freeze Deal Will Result in Much-Needed $50-$60 Prices

Venezuelan President Nicolas Maduro

The tentative output cap deal struck by members of the Organization of the Petroleum Exporting Countries (OPEC) last week may have been greeted by initial surprise and then growing disenchantment, but at least one member desperate to see the deal work is Venezuela, which says $50-$60 oil will benefit its economy.

That message was delivered by Vladimir Zaemsky, Russian ambassador to Venezuela; he told the Sputnik news site that "Caracas hopes for the world's oil market to stabilize in the range of $50-60 per barrel, which is preferable for the Venezuelan economy and will allow the country to smoothly resolve its current problems, stick to the government budget, and secure investments into the sector."

The ambassador added that Caracas welcomed the OPEC decision and went on to remark that "The government is justified in saying that the historic decision was made possible due to the steps taken by President Nicolas Maduro in 2015-2016 toward unifying the efforts of the main hydrocarbon producers to stabilize the oil market.

"Venezuelan experts also note Russia's constructive position on the issue."

However, the republic apparently does not need the sort of agreement with Russia that was struck by the former Soviet Union and Saudi Arabia on September 5, which saw both parties signing a joint statement to step up cooperation in stabilizing the oil market: Zaemsky said, "The level of cooperation between our countries in this area is quite high as it is, as exemplified by regular Russian-Venezuelan contacts.

"Over the recent years, our countries have gained considerable experience in cooperating in this area, including high-level and highest-level meetings; our points of view often match, and when we do have minor differences, the sides try to take mutual interests and suggestions into account."

As hopeful as the Venezuelan government may be, the critical consensus about the OPEC freeze agreement is that at worst it will not be enacted (John Kilduff, founding partner of Again Capital, is firmly in this camp) and at best it will cause a modest rise in prices that will prompt U.S. drillers to increase output – thus prompting Middle East countries eager to keep their market share to pump full tilt once again, thus sending prices back down.

Given that the latter scenario would presumably unfold in the near future, it's unclear exactly how Venezuela, whose economy is on the brink of collapse, would benefit.

And just as an output freeze at current levels is widely thought to have virtually no impact in reducing the global glut of product, a price gain of $50-$60 is not nearly enough to end Venezuela's woes.

That view was recently expressed by Ben Moshinsky, writer for Business Insider, who after describing the country's turmoil noted that "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."