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Venezuela Oil Price Developments – Erratic Markets but Price Rises
The oil price was marked by significant volatility in October. At the
beginning of the month, the price continued to adjust upward in the wake
of the decision of the Organization of the Petroleum Exporting Countries
(OPEC) decision on 24 September to cut production by 900,000 barrels per
day (bpd) to 24.5 million bpd, starting 1 November. As a result, the price
for the Venezuela crude oil basket rose at the beginning of the month by
15.0% from US$ 21.86 per barrel in the week ending 26 September to US$
25.13 per barrel in the week ending 10 October. Prices were bolstered
further in mid-month by speculation about a possible oil industry strike
in Nigeria, lower than expected inventories and concerns about winter
supply levels in the United States. As a result, the Venezuelan oil price
spiked an additional 5.0% to reach US$ 26.45 on 17 October. In the second
half of the month, however, markets began to voice concerns that the
persistence of a higher oil price above the official OPEC price band of
US$ 22 to US$ 28 per barrel could prompt members to raise production
levels again in the 4 December meeting in Vienna. The current band
mechanism requires members to act if the oil price band is not held for 20
consecutive days. Furthermore, meteorological reports issued at the end of
October in the United States indicated that the winter may not be as
severe as originally anticipated. As a result, the Venezuelan oil price
dropped off in the final week to US$ 24.08 per barrel, but still closed up
10.2% over the prior month. The annual average oil price on the Venezuela
at US$ 25.29 per barrel remained 21.9% above the levels for the same
period last year. |
