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Venezuelan President Nicolas Maduro asks to stabilize the price of oil 10.08.2016 at 15:31

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Foto Author: Paramount Vantage

the Poster for the film "Oil", 2007

Venezuelan Authorities have invited producers to re-discuss the price of oil. Previously, Caracas was one of the initiators of the idea of a freezing of the level of production, but the negotiations failed in the end. Experts say that now no one in Venezuela would not support, as all are relatively satisfied with the level of prices. It may mean the final collapse of the Venezuelan economy.

will Venezuela once again to ask the leaders of oil production efforts for the growth of oil prices. As stated by Venezuelan President Nicolas Maduro on state television, it is proposed to conduct on the issue of consultation with the countries — members of OPEC and producers outside the cartel. The Venezuelan oil Minister, Eulochio del Pino added that it is first and foremost about Russia.

"to stabilize prices towards $40 and above — $50-60", — quotes the words of Maduro, Reuters.

the Ministry of energy of the Russian Federation "Gazete.Ru" said that official offers on organization of meetings of the countries — oil producers from OPEC and Venezuela to date has not been received.

Over the past two weeks oil prices fell from levels around $45, falling below $42. But already on Tuesday began a gradual correction upward. Friday at the Intercontinental exchange ICE in London, October futures for Brent crude oil (its price is bound the price of Russian Urals) were traded at $44 per barrel.

For Venezuela, the question of oil prices is critical. The economy is 90% dependent on oil sales. But now Venezuela is forced to sell raw materials even at a loss. As he wrote in Thursday's Bloomberg, it continues to supply to the countries of Central America and the Caribbean at preferential prices.

Earlier, Eulochio del Pino predicted that the winter of 2017 the price of a barrel could fall to $20.

"not only did the Venezuelan oil itself is a high cost of production, she is also very "heavy" (so-called oil of high viscosity) and sour, " says the partner of company Rusenergy Michael Krutikhin. — It is necessary to dilute the more "easy" oil is just so it flowed into the tankers.

To do this, Venezuela has to buy "light" oil (including Russia), as its own raw materials of such quality she has left. It only reduces the profitability of Venezuelan oil exports.

the Economic crisis in Venezuela has reached the point that lack basic food and medicine, tens of thousands of Venezuelans make "food raids" in neighboring Colombia. The international monetary Fund (IMF) predicts that by the end of 2016, the inflation rate in Venezuela will exceed a record 700%, and the state's economy will crash by 10%. And it will be the worst results in the world.

the following year, according to IMF estimates, inflation in Venezuela may exceed 1600%.

Now the country is preparing for the referendum, which will decide whether there will be Maduro President.

Given the country's dependence on oil, Venezuela has periodically advocated concerted action to increase oil prices. In November 2014, Venezuela has tried to develop cooperation with Iran in this matter. Iranian oil Minister Bijan Namdar zangene, the Minister of foreign Affairs of Venezuela Rafael Ramirez in the negotiations adopted a position whereby a comfortable price is $100 per barrel. The sides agreed on cooperation to stabilize oil prices and even tried to involve the Alliance of Russia. But no concrete action has been taken, and the barrel, which at the time cost about $77, continued to fall in price.

At the beginning of 2016 Russia, Saudi Arabia and Venezuela proposed to fix the level of production, so that in the face of increasing demand the prices went up. Initially the idea was supported by all the OPEC countries and several countries outside the organization. But then Iran, which in January alone was lift the sanctions that restrict exports (and therefore production) of oil, said it will freeze the production of only when it reaches the pre-sanctions levels of 4 million barrels per day, today has already been reached).

In the end, the negotiations on this subject on 17 April in Doha, Qatar, the failed, not so much because of the position of Iran, much due to the fact that the Saudis refused to fix production, if the Iranians do not.

the Russian side has repeatedly noted that even without the participation of Iran to freeze production will have a positive impact on prices, as it is supported by 17 major manufacturers, but Saudi Arabia such a scenario is not satisfied.

it is Highly unlikely that any of the leading players in the global oil market will listen to Venezuela. Especially now that the price of a barrel almost at the level where it was when the talks collapsed in Doha (then the barrel cost $42,85).

"Everything has been settled, — says Mikhail Krutikhin. — Countries such as Saudi Arabia, Iran, Iraq, Russia, continue to increase production volumes. And while the prices make drilling in the future."

According to the expert, it is difficult to say to what level should drop oil prices to world leaders began to think again about reducing or at least fixing the production. In Russia, for example, the average total cost of production is about $27 per barrel (this amount includes not only the actual operating costs of lifting oil from wells, but also administrative, tax component etc.).

Senior Vice President, Argus Vyacheslav Mishchenko says that Russia is not interested in discussing the fixing of production. "And in terms of production and export economy of the Russian Federation feels quite comfortable," explains the expert. — So any decisions on these issues can be dictated except by political considerations".

Valery Nesterov from Sberbank CIB said that quotes should fall at least to $30 per barrel — and only then industry leaders can take some steps to strengthen prices. According to forecasts Nesterov, by the end of the year, the price of a barrel will drop to $35-40, the average price will be at around $43. Mishchenko predicts $50 at the end of the year and price stabilization in the corridor of $50-60 next year.

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