16 October 2014, News Wires – The current low price of oil is disadvantageous for everyone and has caused a global “price war,” the new head of Venezuela’s state oil company PDVSA said on Wednesday according to a report.
“The current market situation doesn’t suit anyone, neither consumers nor producers,” Eulogio Del Pino was quoted as saying at an oil conference on Venezuela’s Margarita Island. “We are in a price war.”
Venezuela is calling for an emergency meeting of the Organization of the Petroleum Exporting Countries (OPEC) – prior to its next scheduled 27 November gathering – to halt the slide in oil prices to their lowest level since 2010.
“We made an emergency appeal to OPEC to identify the causes of the destabilization of prices and search for correctives,” Del Pino added.
But Saudi Arabia is quietly telling the oil market it would be comfortable with much lower oil prices for an extended period.
Brent crude bounced off a four-year low on Wednesday to above $85 a barrel, a level that was still down as a drop in the value of the dollar attracted some cautious buying in the oil market.
While Venezuela is a founding member of OPEC, its influence has waned in recent years as production has flagged and it has shown little willingness to join in previous production cuts.
The price fall has come at a bad time for Venezuela, whose economy is widely believed to be in recession even though it is suppressing official GDP data, and which is facing an onerous debt maturity burden this year and next.
Global benchmark Brent crude, trading around $85 per barrel on Wednesday, has dropped 25% since June due to ample supplies and weak demand.
But Del Pino said the South American country is currently in a good position to obtain profits from its crude exports because the cost of extracting crude at the vast Orinoco Belt, Venezuela’s main producing region, is still “competitive.”
“In a situation of price war like this, in a situation of destabilisation, the Belt has unrivalled advantages,” he said. “Many of the producers, who have benefited in recent years from the development of projects which would not have been possible with different prices, are the first to fall.”
Independent experts calculate that the cost of producing, mixing and transporting the Orinoco’s oil is around $50 per barrel if all the crudes and components used for that are local, but PDVSA has been importing costly naphtha on the open market to use it as diluent for its extra heavy crudes.
By comparison, some independent shale crude producers in the United States need prices higher than $80 per barrel to keep their projects ongoing.