Venezuelan Energy and Mines Minister Alí Rodríguez Araque says oil prices have remained at "satisfactory levels" since the Organization of Petroleum Exporting Countries' last ministerial conference. He expects a significant increase in demand for crude in the third and fourth quarters, triggering an oil price increase.
Caracas's El Nacional newspaper quoted Rodríguez as saying, "This is a quarter in which, cyclically, demand drops and prices tend to fall. That is to be expected. A month ago, analysis prepared by the Energy and Mines Ministry indicated that the strong decline in gasoline inventories would soften the drop in prices, because, among other things, this is a quarter of building inventories."
At the moment, Venezuela's refiners are working at 85% of capacity due to low margins, the result of high crude prices, he said: "Nevertheless, currently, refining activity has increased to replace [product] inventories.
"The decline in demand has softened, which does not mean that it has diminished. However, prices have remained at satisfactory levels. During 20 continuous days in the market, the basket of OPEC crudes has been above $23.14/bbl, and the Venezuelan basket above $22.11. In other words, both are above the minimum level of the range of prices agreed upon," he said, referring to OPEC's recent price band agreement. That agreement triggers a production change when the OPEC basket price goes outside the $22-28/bbl range (OGJ, Apr. 10, 2000, p. 34).
Price rise expected
The minister noted that the price of Venezuelan crude had averaged $24.54/bbl for the year to date. "That indicates that currently we are about $8.50/bbl above the level of prices recorded last year. Therefore," he said, "fears expressed by some that there was going to be a crash in prices were unfounded.
"It is impressive, for example, how Boscan crude is selling for more than $19/bbl," he added.
"We are in a quarter where there is a traditional decline in demand, but there are many elements that indicate that, by the third and fourth quarters, there will be a rise in demand and a trend towards an increase in prices," said Rodríguez.
Turning to OPEC's next ministerial conference in Vienna in June, he said members would analyze the outcome of decisions taken at their last ministerial talks in March. "This is elemental prudence because, while the analysis offers us results that I have just commented on, there are always imponderables in the oil market, and an undesirable fall in prices could occur. But, in line with the trend as it presents itself, I believe that the agreement is going to be maintained."
Looking ahead, Rodríguez expects the increase in demand this year to be notable. Some have mentioned a level of 2.5 million b/d, he said, but this is only an estimate.
