When none of your friends listen to you anymore, one option is to just make your own gang.
At least, that’s the thought floating around the head of Venezuela’s president.
Earlier this week, Chavez hinted at a new organization of “petroleum giants” that would be very similar to — no, it would be exactly like — the OPEC.
How he’s defining these oil superstars — or why he included himself in this group in the first place — isn’t exactly clear to us.
The criteria certainly isn’t based on production levels; Venezuela’s crude output peaked more than ten years ago around three and a half million barrels per day:
In 2010, the country barely squeezed by producing 2.36 million barrels per day. (I say “squeezed” because the country’s infrastructure is in poor shape.)
After Chavez kicked out the foreign oil companies in 2007, there was a serious question as to whether PDVSA, Venezuela’s state-run oil company, would be able to produce the country’s oil resources.
It’s true that Chavez can boast about having more proven oil reserves than Saudi Arabia (nearly 296 billion barrels of oil reported last January), but he’s reluctant to tell the whole story…
The quality of crude there isn’t the light, sweet conventional kind. We’re talking about extra-heavy sour crude reserves situated in the Orinoco Belt in Central Venezuela.
There’s another reason Chavez’s new oil cartel will never see the light of day: Nobody else is interested!
The Saudis are comfortably in control of the OPEC. And Russia simply isn’t interested. The OPEC has unsuccessfully courted the Russians before. Why would Putin want to be weighed down with quotas?
Besides, no matter how much Chavez rants about the evils in the United States, the truth is he needs us more than we need him. About 45% of all his oil exports are destined for U.S. refineries on the Gulf Coast, which can specifically handle their poor grade of crude oil.
Did Oil Just Bottom?
While Chavez was busy bluffing, oil prices may have bottomed after falling to $76 per barrel recently.
The EIA’s weekly oil report showed a 4.7 million barrel draw in U.S. crude oil inventories, putting us back within the five-year average range. Total consumption is still averaging slightly under 19 million barrels per day.
The good news is our imports of crude oil declined this week by more than a million barrels, while domestic production climbed to 5.8 million barrels per day.
The latter should make perfect sense: There are more rigs drilling into U.S. soil than in recent years.
And while we may never return to our glory days of oil production, it’s certainly a start.
Enjoy your weekend,
Editor, Energy and Capital
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