Caracas, Venezuela, October 3, 2006—Venezuela announced last Friday that it would be voluntarily cutting 50,000 barrels of its daily crude oil production. Cuts were set to begin on Sunday.
According to the press release from the Venezuelan Ministry of Energy and Petroleum, “The Minister of Energy and Petroleum and President of PDVSA, Rafael Ramírez, communicated with the President of the OPEC ministerial conference, Edmund Maduabebe Daukoru, to announce the country’s voluntary disposition to reduce production.”
Fellow OPEC member, Nigeria, joined Venezuela in its decision. The Nigerian state oil company announced last week that on October 1st, they would be cutting crude exports by 5% or 120,000 barrels per day (bpd).
Last Friday, The New York Times reported that the slight slash in both Venezuelan and Nigerian production was part of an unwritten agreement between the OPEC countries during last month’s OPEC meetings, in the case that the price of oil fell below a certain level.
Crude prices have been dropping steadily since their highs of two months ago. Last Monday, September 25th, the price of petroleum per barrel dipped briefly below $60. According to Reuters, as of this Monday, October 2nd, oil was down at just over $61 a barrel.
Venezuelan President Hugo Chavez has stated that an appropriate price for oil is between $50 and $60 a barrel.
“Venezuela has been in the vanguard of the recuperation of oil prices and today they are above $50 a barrel, which is an adequate price,” said President Chavez last Friday.
On the world market, there appears to have been no significant reaction to the cuts in oil production. According to the Associated Press, the total amount of crude that would be removed from the market is equal to less than one tenth of one percent of global demand.
During last months’ meeting of the Organization of Petroleum Exporting Countries (OPEC), members decided to keep their official output quota at 28 million bpd. OPEC has not touched oil production quotas since July 2005. The next meeting is scheduled for December 14th, in Nigeria.
According to the Venezuelan Ministry of Energy and Petroleum, Venezuela has been producing at its quota of 3.22 million bpd, however this number is debated by some oil analysts, who believe Venezuelan production to be closer to 2.6 million bpd. With the slight slash in extraction, Venezuela now plans to be producing 3.17 million bpd.
With 81 billion barrels of proven reserves, Venezuela is currently the fifth largest oil producing country in the world. However, the South American nation recently began a new push to certify and quantify and certify its extra-heavy crude reserves in the Orinoco Oil Belt, which they believe to be estimated at 235 billion barrels. If and when these reserves are officially recognized, Venezuela would be considered to have the largest proven oil reserves in the world.