Iraqi oil production will have an impact on the Venezuelan economy

<a href=www.vheadline.com>Venezuela's Electronic News Posted: Monday, June 23, 2003 By: Jose Gabriel Angarita

VenAmCham economist Jose Gabriel Angarita writes: The price of OPEC oil went down again last week, to an average of $26.17 per barrel, compared to $27.54 per barrel the week before, according to figures published in El Universal today. The source is the OPEC Secretariat in Vienna.

The oil cartel is trying to keep prices in a band ranging from $22-28 per barrel, but expects a major decline when Iraq fully recovers its production capacity and expands its exports. Information has emerged that, following the recent military conflict, Iraq resumed oil exports through the port of Ceyhan this Sunday, putting an end to a two-month interruption due to the war.

Iraq, the country with the world's second-largest oil reserves, has signed contracts with companies from the United States, Spain, France, Turkey, and Italy to market its crude, meaning that oil exports will be gradually increasing. That will raise world oil supply and put downward pressure on prices. However, current Iraqi production stands at 750,000 barrels per day, the target for the end of June is 1 million barrels per day, and 2 million barrels per day should be flowing by the end of the year, though analysts view the latter figure as over-optimistic.

There is no question that when Iraqi production takes its place on the international market, it will have an impact on the Venezuelan economy, since income from crude oil exports, the leading source of foreign exchange for the Venezuelan economy, will go down. In that case, the National Treasury will find itself in an even more difficult position given the large number of internal and external spending commitments it must honor, as a result of the policy of massive public borrowing in the last five years.