• 11 hours Iraq Begins To Rebuild Largest Refinery
  • 15 hours Canadian Producers Struggle To Find Transport Oil Cargo
  • 17 hours Venezuela’s PDVSA Makes $539M Interest Payments On Bonds
  • 18 hours China's CNPC Considers Taking Over South Pars Gas Field
  • 20 hours BP To Invest $200 Million In Solar
  • 21 hours Tesla Opens New Showroom In NYC
  • 22 hours Petrobras CEO Hints At New Partner In Oil-Rich Campos Basin
  • 24 hours Venezuela Sells Oil Refinery Stake To Cuba
  • 1 day Tesla Is “Headed For A Brick Wall”
  • 1 day Norwegian Pension Fund Set to Divest From Oil Sands and Coal Ventures
  • 2 days IEA: “2018 Might Not Be Quite So Happy For OPEC Producers”
  • 2 days Goldman Bullish On Oil Markets
  • 2 days OPEC Member Nigeria To Issue Africa’s First Sovereign Green Bond
  • 2 days Nigeria To Spend $1B Of Oil Money Fighting Boko Haram
  • 2 days Syria Aims To Begin Offshore Gas Exploration In 2019
  • 2 days Australian Watchdog Blocks BP Fuel Station Acquisition
  • 2 days Colombia Boosts Oil & Gas Investment
  • 2 days Environmentalists Rev Up Anti-Keystone XL Angst Amongst Landowners
  • 3 days Venezuelan Default Swap Bonds At 19.25 Cents On The Dollar
  • 3 days Aramco On The Hunt For IPO Global Coordinators
  • 3 days ADNOC Distribution Jumps 16% At Market Debut In UAE
  • 3 days India Feels the Pinch As Oil Prices Rise
  • 3 days Aramco Announces $40 Billion Investment Program
  • 3 days Top Insurer Axa To Exit Oil Sands
  • 4 days API Reports Huge Crude Draw
  • 4 days Venezuela “Can’t Even Write A Check For $21.5M Dollars.”
  • 4 days EIA Lowers 2018 Oil Demand Growth Estimates By 40,000 Bpd
  • 4 days Trump Set To Open Atlantic Coast To Oil, Gas Drilling
  • 4 days Norway’s Oil And Gas Investment To Drop For Fourth Consecutive Year
  • 4 days Saudis Plan To Hike Gasoline Prices By 80% In January
  • 4 days Exxon To Start Reporting On Climate Change Effect
  • 4 days US Geological Survey To Reevaluate Bakken Oil Reserves
  • 5 days Brazil Cuts Local Content Requirements to Attract Oil Investors
  • 5 days Forties Pipeline Could Remain Shuttered For Weeks
  • 5 days Desjardins Ends Energy Loan Moratorium
  • 5 days ADNOC Distribution IPO Valuation Could Be Lesson For Aramco
  • 5 days Russia May Turn To Cryptocurrencies For Oil Trade
  • 5 days Iraq-Iran Oil Swap Deal To Run For 1 Year
  • 7 days Venezuelan Crude Exports To U.S. Fall To 15-year Lows
  • 8 days Mexico Blames Brazil For Failing Auction

Breaking News:

Iraq Begins To Rebuild Largest Refinery

Alt Text

Hedge Funds Killed The OPEC Rally

Despite the success of OPEC’s…

Alt Text

What’s Holding Back Saudi Vision 2030?

Saudi Arabia’s vision 2030 has…

Will OPEC Be Forced To Call An Emergency Meeting Soon?

Will OPEC Be Forced To Call An Emergency Meeting Soon?

Oil prices dropped to fresh lows during midday trading on January 20, with WTI dipping below $27 per barrel and Brent trading under $28.

The crash in oil since December has only deepened the pain for oil-exporting countries, even for those within OPEC. Despite the cartel’s inability to agree on a production target at its meeting in early December, some of its members are clamoring for action.

Venezuela recently requested an emergency meeting in a letter sent to the other 12 members of OPEC. That is not necessarily news since Venezuela did the same thing last year, but there are growing fears that the South American nation may not be able to hold out much longer with oil prices so low. Related: When Will Petrobras’ Fire Sale Start?

According to Bloomberg, OPEC has not issued an official response to Venezuela’s letter, but it is difficult to see Venezuela succeeding in bringing the disparate members together. An emergency meeting requires the approval of all member nations, and if anything is clear, it is that Saudi Arabia and its Gulf state allies are steadfast in their current course.

That creates an impossible situation for Venezuela. Oil prices are showing no signs of turning around, and Venezuela is running low on foreign exchange and the government might be unable to meet debt payments this year and next. Related: Kenya Hoping to Export Oil, Despite Global Downturn

In a sign of how the vice of low oil prices is squeezing the South American OPEC member, the Venezuelan state-owned oil company PDVSA recently asked its international partners to cover the cost of imported naptha for its heavy oil production at a joint venture project.

Oil from the Orinoco oil belt is so heavy that it needs to be diluted with naptha, or a light form of crude. But PDVSA needs to import naptha, typically from the U.S. Gulf Coast. The joint venture that PDVSA has with Chevron and Repsol, for example, can require around $9 million per month for imported naptha, according to Reuters. Up until now, PDVSA covered that cost, but in recent days it sent a letter to its partners, telling them that they have to pay for the imported naptha now, presumably because PDVSA no longer has the resources to do so. Related: Does Buffett See A Bottom In Oil Prices

Dwindling resources have led to requests from suppliers for prepayment before cargoes are delivered to Venezuela. The possibility of nonpayment is very real.

It seems that the only thing that can rescue Venezuela from its rapidly approaching financial crisis is a strong rebound in oil prices. But without cooperation from OPEC, that might not happen anytime soon.

By Charles Kennedy of Oilprice.com

More Top Reads From Oilprice.com:




Back to homepage


Leave a comment
  • SH on January 20 2016 said:
    "Emergency Meeting" carries no weight with OPEC. Several of those have already been held with no unilateral decisive action or impact on the market. OPEC is history and dead.
  • Bob on January 20 2016 said:
    The Saudi's (along with the other Gulf members) are being very naive and showing that they don't really understand how US bankruptcies work. US shale companies that go through bankruptcy will become much more competitive as part of the US bankruptcy process. Sure current owners will be wiped out but the companies will continue to pump oil as ownership will merely pass to their creditors. As part of the US bankruptcy process, the US shale companies will be able to write down their assets and eliminate much of their debt (as it will be converted to equity) thereby greatly reducing their break even point. In the end, the Saudi's market share strategy pushing US shale companies through US bankruptcy restructuring will back fire on them and guarantee that oil will stay much lower for much longer as it will make the US shale industry much for competitive for the future.

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News