Two of the world´s largest known oil deposits boast the names of late Venezuelan president Hugo Chavez and former Brazilian president Luiz Inacio “Lula” da Silva. The thinking goes, these are the towering figures who showered the wealth of their countries´ abundant natural resources on the people. Their deteriorating economic and political legacies now speak otherwise.
The rechristening of the Faja del Orinoco last year as the Hugo Chavez Frías Orinoco Oil Belt has not been accompanied by the massive investment needed to tap the vast extra-heavy crude belt that forms the backbone of the Opec country´s ambitious production growth plans. Even before oil prices started tumbling in 2014, state-owned oil company PdV didn´t have enough capital to pay for its share of the development. The naphtha and light crude needed to move the viscous resource to market renders the Faja a costly and complicated endeavor. Continue reading
In December 2014, with Brent at around $50/bl, Opec secretary-general Abdullah al-Badri said: “We do not want a very high price because there will be less demand and consumption. We do not want a low price because there will be less investment and supply.”
When the price was $110/bl, or $100/bl, or $90/bl everyone was happy, he added. Well, US shale oil and Canadian oil sands producers certainly were.
Saudi oil minister Ali Naimi’s message to the horde of energy executives and journalists gathered in Houston this week is being portrayed by some as a dose of cold, hard reality from the world’s largest crude producer.
Drillbits have stopped spinning across most of Latin America these days, and oil revenue for the region´s big producers has tanked. That has some beleaguered governments seeking respite at the fuel pump.
Yesterday’s Doha dealings set in motion a process that could lead to confidence-building measures that might open the way for an agreement on production cuts somewhere down the line. In March, a clutch of major producers would promise not to exceed their inflated January output levels. If the promise was kept and the fundamentals required, there might then be cuts, no earlier than the June Opec meeting. No wonder a futures market carried away by newswire headlines fell back sharply on the actuality.
The Saudis present it like this: “Let us freeze first and see if there is a will among everybody to co-operate in such a freeze. Let us see the effect of that freeze. If it is sufficient to create a better psyche for the market, and the market stabilises and improves, fine. If not, at least we have a good level of trust among us.” Continue reading