OPEC Meeting to Discuss Oil Cutback Failures Comes As Worries Grow Over Venezuela's Potential Collapse
However, calamity in the Republic may be good news for the crude market.
Calamity in Venezuela may be good news for the crude market.
Although considerable scrutiny has already been focused by the analytical community on why certain members of the Organization of the Petroleum Exporting Countries (OPEC) are falling behind in their pledges to limit production under the cartel's cutback agreement, people familiar with the matter told Bloomberg that OPEC will convene in Abu Dhabi as early as next week to discuss the matter.
Presumably, talk could also include the precarious situation in Venezuela, which experts say could become the first sovereign oil producer to "fully fail" if president Nicolas Maduro on Sunday attempts to cement his power by forming a new National Constituent Assembly (ANC) composed of Maduro supporters that would supersede other legislative bodies.
Venezuela as well as Algeria (who have averaged a 39 and 70 percent cutback compliance to date) won't attend the OPEC meeting, which is being chaired by Kuwait and Russia; however, according to the sources, Iraq (whose compliance slumped to 29 percent in June) has indicated it will attend, and others have yet to confirm their presence.
Venezuela appears poised to earn the dubious distinction of being the first sovereign oil producer to fully fail
Helima Croft, RBC Capital Markets
The sources predict that some nations will argue that the independent bodies used by OPEC to determine compliance overestimate their production levels.
It is unclear whether the meeting will be an opportunity for Saudi Arabia to follow through on its vow to increase pressure on cheating members.
While the outcome of the meeting may well affect oil prices, the Venezuela situation is likely to have a far greater impact if the ANC is formed, which would allow Maduro - widely blamed for sending the republic into an economic tailspin - to rewrite the country's constitution as he pleases.
Helima Croft, global head of commodity strategy at RBC Capital Markets, said in a note that U.S. president Donald Trump has "issued stark warnings to Maduro about the elections and is
reportedly giving serious consideration to targeting the country's oil sector by either banning Venezuelan imports into the United States or prohibiting the use of dollars in [state-run oil company] PDVSA transactions."
She added that "Either measure would result in extreme economic duress; with the country's foreign reserves recently having fallen below $10 billion, PDVSA will be extremely hard pressed to avoid a disorderly default in the autumn or continue any semblance of regular salary payments."
Croft concluded that "Unless Maduro has an 11th-hour change of heart, Venezuela appears poised to earn the dubious distinction of being the first sovereign oil producer to fully fail."
Skangas duel fuel LNG carrier Coral Energy (image credit/Skangas)
Liquified natural gas (LNG) bunker tanker Coralius has made its first trip loading and delivering LNG to and from Norwegian ports, according to trade press reports.
The 5,800 cubic meter capacity tanker, which is owned by Norwegian gas company Skangas, was delivered to the company in June. Skangas also operates LNG carrier Coral Energy.