Starting June 1, Venezuela will have a 2.9 million barrel per day OPEC quota

<a href=www.vheadline.com>venezuela's Electronic news Posted: Thursday, May 22, 2003 By: Jose Gabriel Angarita

VenAmCham's Jose Gabriel Angarita (economist) writes: The Organization of Oil Exporting Countries (OPEC) agreed to increase quotas and reduce production in an attempt to put an end to an estimated 2 million bpd glut on the world oil market. The cartel may be trying to keep the markets supplies, given the seasonal impact on oil demand ... but idle capacity among its member countries is estimated at about 1.2 million bpd, meaning that not much in the way of price variation can be anticipated, in the short run at least.

The expectations generated at the beginning of the year due to the impending military conflict have not materialized, since oil prices have remained high and are not in question. The cause may be the slow return of Iraqi production (output for domestic consumption is estimated at 143,000 bpd), terrorist attacks in the Middle East (the region that supplies about a third of world oil exports), and fears of new terrorist attacks in the United States.

For Venezuela, according to statistics published by Banco Mercantil, April saw a recovery of production to an average of 2.6 million bpd, though the average for the first four months of the year was 1.7 million barrels per day. The price of Venezuela's oil export basket has averaged US$27.14 per barrel so far in 2003, but it has sunk to about $21 per barrel since the end of the Iraq war.

Oil prices will continue to be influenced by the fluctuations of world supply and demand and by the slow recovery of Iraqi production, the recovery of the Venezuelan oil industry, and the Nigerian elections, as well as declines of international inventory levels.

The best thing for Venezuela right now is the maintenance of a certain stability in the world, since lower oil prices would worsen the country's fiscal crisis by reducing revenue from oil exports.