Mérida, 13th November 2014 (Venezuelanalysis.com) – Venezuela’s foreign minister Rafael Ramirez is touring a number of oil producing nations in a bid to prevent a further fall in oil prices that could squeeze the South American country’s finances.
Ramirez, who is also Venezuela’s main Organisation of Petroleum Exporting Countries (OPEC) representative and is a former oil minister and president of state oil company PDVSA, began the tour of Algeria, Qatar, Iran and Russia on Wednesday. All are OPEC members with the exception of Russia.
The visits come ahead of an OPEC summit in Austria on 27 November, where strategies to confront the challenge to oil markets posed by fracking, among other issues, will be discussed. The tour also occurs one month after Venezuela’s calls for an emergency OPEC meeting over falling oil prices went unheeded.
Earlier today Ramirez met with Qatar’s prime minister, Abdullah Bin Nasser Bin Khalifa Al Thani, where Ramirez said, “We should stabilise the oil market and defend the price of crude”.
The same message was made on Wednesday when Ramirez met with the Algerian president Abdelaziz Buteflika, after which he declared, “We have exchanged our points of view about the oil market, the need for stability and the defence of the price of oil”.
Last month Venezuela purchased a shipment of Algerian light crude, the first crude oil ever to be imported to Venezuela, which is to be mixed with the extra heavy crude extracted from Venezuela’s Orinoco Oil Belt. PDVSA is also seeking to purchase up to 2.4 million barrels of diesel and gasoline at short notice after a blackout and storm temporarily affected operations at Venezuela’s biggest refinery.
Venezuela depends on oil sales for over 95% of its export earnings, with the hard currency being used to pay for imports, social programs, external debt and arbitration settlements. As a result the decrease in the price of oil this year has been viewed with concern. Brent crude has fallen from a previously stable US $105 in July down to $81 currently.
There has been speculation in the financial press as to whether Venezuela will be able to meet its financial obligations if the price of oil remains where it is or continues to fall. Siobhan Morder, head of Latin America strategies at Jefferies, wrote on Wednesday that “to balance the external accounts, Venezuela needs to adjust and requires a minimum price close to $85”, Reuters reported.
However Venezuelan authorities insist that the annual budget is set at a conservative estimate of oil prices as a buffer to fluctuations in the global market, with the 2015 budget estimating an average annual oil price of $60.
Under the government of Hugo Chavez (1999 – 2013), Venezuela diversified its exports away from the United States to China and other partners, with some oil shipments being used to finance loans and bilateral development agreements.
The administration of President Nicolas Maduro seeks to increase total oil production to 6 million barrels per day by 2019, and is investing heavily along with both multinationals and foreign countries to achieve this aim. In 2013 production was just under 2.5 million bpd, and production has failed to recover from the opposition-led oil shut down in 2002 – 2003, before which production reached a high of 3.5 million bpd in 1997.