Venezuela seeks allies outside OPEC to steady oil prices

GMT 21:57 2015 Tuesday ,02 June

Arab Today, arab today Venezuela seeks allies outside OPEC to steady oil prices

Venezuelan Oil Minister Asdrubal Chavez
Vienna - AFP

Latin American crude producer Venezuela, struggling to cope with sharply lower oil prices, is seeking support outside OPEC to stabilise the market, it said Tuesday before this week's cartel output meeting.

Venezuelan Oil Minister Asdrubal Chavez is currently in the Austrian capital to participate in Friday's meeting of the 12-nation Organisation of Petroleum Exporting Countries (OPEC).

Caracas proposes to establish a "technical working group" of both OPEC and non-OPEC nations, it said in a statement obtained by AFP.

The aim of the group is "to monitor the market and make recommendations to increase the effectiveness of the decision-making process of the producing countries".

The statement does not explicitly urge OPEC to lower its official output ceiling, but instead emphasises that oil producers needed a better understanding of events "that could destabilise" the market.

Chavez added "the best way towards facilitating market stabilisation is through agreement and active cooperation among all exporters" and noted that some technical work was already being undertaken between OPEC and non-OPEC countries.

The text continued: "The Venezuelan government has promoted some initiatives in its search for consensus among core members of OPEC and non OPEC producers, targeting common views that help define joint energy policies towards market stabilisation."

On Friday, OPEC is widely expected to refrain from altering its daily oil output target of 30 million barrels despite the glut that sent prices slumping 60 percent between June and January.

Despite a recent recovery in prices to around $60, prices remain almost 50 percent lower than at the same stage last year.

OPEC opted to freeze the collective output ceiling again in November, sending prices sliding further, in a policy aimed at hurting non-OPEC output, particularly US shale producers that have higher costs.

- Revenues slump -

However, poorer OPEC members -- such as Algeria, Angola, Venezuela and Libya -- need higher crude oil prices to increase precious revenues and balance their budgets, and have traditionally called for output cuts.

Earlier on Tuesday, Angola declared that $80 might be the "right oil price" for the market, adding that it "has suffered a lot from the drop in oil prices" because crude represents 98 percent of the African nation's revenues.

However, OPEC's biggest and most influential member, Saudi Arabia, appear determined alongside its closest Gulf allies -- Kuwait, Qatar and United Arab Emirates -- to defend their market share rather than price levels, amid the challenge of US shale oil.

In recent times, OPEC has meanwhile sought to foster closer ties with non-OPEC producers like Russia and Mexico.

Saudi Arabia called in March for closer cooperation between all producers, stressing that 70 percent of production comes from outside the 12-nation cartel.

Venezuela's oil-dependent economy, plagued by recession and suffering from runaway inflation, has also been ravaged by the recent price slump, which has slashed revenues.

Venezuela is struggling with a sharp downturn, 68.5-percent annual inflation and severe shortages of the basic goods that oil money is used to import.

The nation's foreign exchange reserves are currently languishing at their lowest levels in almost 12 years.

Venezuela, which has the world's largest proven oil reserves, gets more than 96 percent of its foreign currency from oil exports.

President Nicolas Maduro said earlier this month he had "high hopes" for a new alliance between the OPEC and non-OPEC nations to stabilise prices at $100.

Venezuelan state oil company PDVSA recently revealed that production, income and exports sank across the board due to the oil price collapse.

Since February, the oil market has rebounded by 40 percent but prices remain far below the same stage last year, when a barrel cost in excess of $100.

- 'Mismanaged' oil sector -

Venezuela's oil production stood at 2.44 million barrels per day in April, according to recent data from the International Energy Agency watchdog.

Capital Economics analyst Thomas Pugh told AFP that Caracas "is not going to get a cut" in output from this week's OPEC gathering.

"The economy of Venezuela was not in a great state even before. Now the crash is simply worse. There's a pretty negative outlook," he said.

IHS Global Insight analyst Jamie Webster added that Venezuela "need to recognise they don't have the ability to behave strategically, only tactically".

"They don't have the ability to deal with a cut" in output alongside other OPEC nations, he said.

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