China to Help Venezuela With Oil Production, Saudi & Russia Agree to Further Cooperation

Iranian geopolitical posturing continues. File Image / Pixabay

It may amount to little, but China's intervention in Venezuela indicates that perhaps the global crude tightening scenario currently earning media headlines may not be all that analysts foresee: according to a statement issued by the Bolivian republic's finance ministry, China will give $250 million from its development bank to boost oil production.

The statement disclosed, "We have clinched an authorization for direct investment from the China Development Bank, to increase PDVSA's production, of more than $250 million and we are already moving forward specific financing as part of the special $5 billion credit that the Chinese government has given to Venezuela for direct investment in production."

Further details on the terms of the deal were not available, but it's hardly the only behind-the-scenes maneuvering taking place in reaction to the declining fortunes of once-mighty crude producing countries: according to a statement by the energy ministry of Saudi Arabia, the Saudis and Russia have discussed market conditions and agreed to continue close coordination in the interest of producers, consumers and the global economy.

Reuters reported that Khalid al-Falih, the kingdom's energy minister, spoke with Russian energy minister Alexander Novak on Monday and "discussed the need to modify the current monitoring process accordingly and agreed to task a joint OPEC and non-OPEC committee known as the JTC with developing and recommending a suitable process to be considered by the ministerial JMMC panel."

Of course, the most unexpected events could easily impact the best efforts of producing nations to compensate for declining exports from the likes of Venezuela and Iran.

In fact, Iran, which has repeatedly attempted to portray itself as a responsible member of the world oil community, this week threatened to disrupt oil shipments from neighboring nations if the U.S. continues to force all countries to stop buying its oil under the reinstatement of sanctions against the Islamic republic.

The threat was reportedly made by president Hassan Rouhani on Iran's presidential website, but when media asked him to elaborate, he declined to provide clarification, instead pointing out, "The Americans have claimed they want to completely stop Iran's oil exports; they don't understand the meaning of this statement, because it has no meaning for Iranian oil not to be exported, while the region's oil is exported."

He subsequently added, "The United States will never be able to cut Iran's oil revenues."

Eurasia Group last week said the U.S. sanctions against Iran will remove 700,000 barrels per day (bpd) from the market instead of the 300,000-400,000 bpd it previously predicted -  however, while such figures have caused some analysts to panic, others maintain that the combined efforts of the Saudis, Russia, and the U.S. will be more than enough to cover this and other losses.