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Venezuela, openly frustrated by Saudi Arabia’s refusal to support a cut in crude production, is reaching out beyond OPEC to discuss ways to stop the recent decline in oil prices.
OPEC will be meeting at its Vienna headquarters on Nov. 27 to decide on its production goals, but on Nov. 17, Venezuelan President Nicolas Maduro said he and Russia were working to set up a meeting “very soon” with oil countries outside OPEC as well as within the cartel to discuss ways to prop up the price of crude, which is now at a four-year low.
As Maduro was speaking, his foreign minister, Rafael Ramirez, was in Moscow to speak with Russian Energy Minister Alexander Novak to discuss setting up a meeting of OPEC and non-OPEC oil producers. Novak said, “We discussed this theme and now we are working out those proposals on our side.”
The Russian minister said he and Venezuelan officials would meet again on Nov. 25 – two days before the OPEC production meeting – to talk further, but didn’t elaborate.
The drop in prices has been bad economic news for Latin American oil producers, particularly Venezuela. One reason has been the boom in production in North America, where Canada and the United States together extracted more crude from shale and oil sands than they have in a half-century.
An official from Ecuador, who requested anonymity, said that at the OPEC meeting his country and Venezuela will urge cartel to keep production within the ceiling of 30 million barrels per day. OPEC’s own data shows that only last month, for instance, its members produced 30.25 million barrels of oil per day.
Another OPEC delegate called for a slightly higher cut that he said would eliminate the risk of the cartel having a dangerous surplus in 2015. The delegate said OPEC must decide at the summit to reduce production by as much as 1 million barrels per day.
The delegate, who requested that he be identified only as being from a country with a small oil sector, told Reuters that OPEC’s own data show that the global demand for OPEC oil is likely to decline next year to between 29.2 million barrels per day and 29.5 million barrels per day.
“We are producing about 1 million barrels above that, which is quite a lot,” the delegate said. “Probably a cut of 1 million barrels would be enough.”
But Saudi Arabia, OPEC’s largest producer, tends to hold sway at the cartel’s meetings, and it has expressed no interest in cutting production unless the price of oil gets close to $70 per barrel. For now, the benchmark price of most crudes is closer to $80 a barrel.
As a result, at least one oil analyst believes countries like Venezuela don’t have much of a chance of swaying OPEC at the Nov. 27 summit.
“I don’t see anyone in non-OPEC volunteering to come to the rescue,” Olivier Jakob, managing director at Petromatrix GmbH in Zug, Switzerland, said in an e-mail to Bloomberg News. “Venezuela is in a hot spot, as they have to fear the expected increase of Canadian crude oil to the U.S. Gulf.”
Jakob was referring to the much-debated and -delayed Keystone XL pipeline, running from the oil sands of the Canadian province of Alberta, through the US Midwest to the Gulf. The project is likely to win approval the US Congress when the Republican Party takes over the majority of both its houses in January. (Is this still a possibility after the result from yesterday/today?)
By Andy Tully of Oilprice.com
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Andy Tully is a veteran news reporter who is now the news editor for Oilprice.com