Venezuela Announces Effort to Reduce OPEC Production Rates

Venezuelan President Nicolas Maduro said on Thursday that his country had begun discussions with the Organization of Petroleum Exporting Countries (OPEC) on mechanisms to increase the global oil price.

"He spoke with the secretary of OPEC, we are making efforts for a new meeting soon between OPEC and non-OPEC members, with Russia at the head ... to stabilize the price towards $40 (per barrel) and over $50 and $60," Maduro said on state TV, referring to Oil Minister Eulogio Del Pino.

Maduro gave no further details or explanations of the meeting.

An informal meeting of formal and informal members of OPEC could feature a discussion on a potential production freeze in September, Reuters said.

Twice this year, OPEC has refused to reduce production rates for oil, prompting its rival, Russia, to increase production as well. Iran and Saudi Arabia’s regional rivalry has prevented either side from pursuing polices that would lead to the increase of Brent barrel prices.

Other contractual oil obligations have also limited Venezuela’s path towards recovery. The Petrocaribe energy pact requires Venezuela to sell crude at a cheaper rate to specific countries in the Caribbean, even while the South American country’s own economy is struggling to stay afloat. The deal was designed to allow Venezuela to profit despite artificially low sale prices, but as the oil pricing crisis unfolded, the deal put Venezuela at a disadvantage in terms of its own source of foreign income.

Because of its Petrocaribe obligations, at the end of 2015, Venezuela owed $23 billion to countries within the contract. Adding to Venezuela’s struggles, some of the debtors haven’t been using dollars to pay their dues, and instead have been offering up exported items such as blue jeans and coffee. Cuba owes $15 billion in debt to the organization – the largest of any country in the pact.

Venezuela current sells 750,000 barrels to the United States per day, according to figures from ClipperData.

By Zainab Calcuttawala for Oilprice.com

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