Venezuela has lots of oil, but it is heavy and sulphurous, which means it is costly to refine and is not terribly viable uniess oil prices remain high for a sustained period (refinery capacity is now skewed towards the sweet, light grades). That’s why Venezula, along with Iran, is the most aggressive among OPEC members in advocating production cuts.
The market appeared to be providing the South American oil producer with exactly what it wanted, until oil prices started faling back in July. So Chavez has a remedy. As reader Michael noted:
I’m sure china had only their interests in mind when they were hoarding diesel prior to the Olympics…however, that sent a powerful message to Chavez and Putin…manipulation of futures markets requires a certain ability to control supply (hoarding). So this “oil bank” is no doubt, a last gasp effort by Venezuela, which requires ~$90 oil to sustain their economy, to keep prices high.
From Rigzone:
Venezuela’s President Hugo Chavez on Tuesday called for oil producing countries to create an oil bank and warned oil prices could fall further.
“We once proposed the creation of an OPEC Bank…but it wasn’t adopted. Lets work with the idea of an oil bank, a couple of oil (producing) countries can do it,” Chavez said as he arrived in Brazil for a state visit.
The president gave no details of how this bank would work but insisted it was a needed idea.
Chavez also acknowledged falling oil prices and said he believed they would stabilize soon.
“We expect (the price) to stabilize between $80, $90 and $95 a barrel,” he said.
His administration has lately defended the idea of a price for West Texas intermediate crude at $100 a barrel, a price level the Andean country promoted during the September meeting of the Organization of Petroleum Exporting Countries in Vienna.
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Matt Dubuque
This is a reprise of his proposal from 2 OPEC meetings back whereby the OPEC nations would price their oil on a basket of currencies, rather than just the dollar.
Several members of the GCC are sympathetic to this idea, to the surprise of many observers. The Saudis blocked it coming to a vote, for domestic considerations.
Matt Dubuque
nospammdubuque@yahoo.com
When the article describes Venezuela as “the Andean country”, I wonder what is else is wrong in it. That being said, I don’t doubt that Chavez is as desperate as GWB now.
Commodities R.I.P
Maybe Chavez can now focus on more important things, like appointing his horse as Venezuelan oil minister, or mandating that a pontoon bridge be built to cuba…
Dear Mean Mister Mustard,
http://en.wikipedia.org/wiki/Andes
The Andean range is composed principally of two great ranges, the Cordillera Oriental and the Cordillera Occidental, often separated by a deep intermediate depression, in which arise other chains of minor importance, the chief of which is Chile’s Cordillera de la Costa. Other small chains arise on the sides of the great chains. The Cordillera de la Costa starts from the southern extremity of the continent and runs in a northerly direction, parallel with the coast, being broken up at its beginning into a number of islands and afterwards forming the western boundary of the great central valley of Chile. To the north this coastal chain continues in small ridges or isolated hills along the Pacific Ocean as far as Venezuela, always leaving the same valley more or less visible to the west of the Western Great Chain. The mountains extend over seven countries: Argentina, Bolivia, Chile, Colombia, Ecuador, Peru and Venezuela, some of which are known as Andean States.
By any chance, Mean Mister Mustard, do you have any comment to make about “Bosniak” ?
The Reserve Bank of Australia just cut rates by 1%
Venezuela was firt among the charter members of OPEC. It was left out of the prosperity that should have been shared with S America during the post WWII recovery but was’nt. We hitched ourselves to the Royal House of Saud. And they have thanked us so profoundly on September 11, 2001. I do not remember any Cubans or Venezuelans on the attack teams. But right wing republican zealots will fabricate enemies when there are none, like the gulf of tonkin and weapons of mass destruction. We need a geopolitical new deal starting with our American states to the South to help us bulk up to take on the Pacific Rim Coalitions that have formed.
If I’m not mistaken, the only refineries for Chavez’s heavy crude are in the US. I Believe Iran has a similar problem and has to send its oil outside its borders for refinement plus Iran has been buying US wheat since June.
Russia is another story where taxes and fees cost producers almost $85 a barrel there. Also, their stock market is not fairing to well lately as money is fleeing the Soviet regime. (down 70% from highs?)
I read oil could be anyway from $50 to $262 depending on the circumstances.
I say, enjoy the lull.