Top oil officials from major producers Venezuela and Saudi
Arabia are set to hold a rare bilateral meeting later on Wednesday
as OPEC member countries grapple with a continuing price slump.
Venezuelan foreign minister Rafael Ramirez--until recently head
of state energy giant Petroleos de Venezuela, or PdVSA, and still
his country's OPEC representative--and Saudi oil minister Ali
al-Naimi usually meet only at scheduled gatherings.
But their meeting on the sidelines of a climate conference on
the Venezuelan resort island of Margarita is sign of the pressure
on the Organization of the Petroleum Exporting Countries following
oil's more-than 25% drop since the summer. The exact timing of the
meeting is yet to be confirmed.
The two countries hold opposing attitudes to oil's slump.
Venezuela's public finances are reliant on high prices while the
Saudis are reluctant to take steps to help support prices by
cutting its oil output. This week Saudi Arabia cut the price at
which it sells its crude to the U.S.--a move seen as an effort to
maintain market share for its exports there.
Mr. al-Naimi had long planned to attend the Venezuela
conference, but the private meeting with Mr. Ramirez was only added
to his agenda recently, according to people familiar with the
situation.
But if Mr. Ramirez is hoping the meeting will yield action by
the OPEC kingpin, he will likely be disappointed, Saudi officials
said.
"The message is going to be clear, and will be repeated again in
the OPEC meeting: Saudi Arabia is not going to act as swing
producer," one of the officials said.
During past oil price slumps, OPEC has acted collectively to
rein in production to support prices. This time its influence over
the market is limited because much of the oil flooding the market
comes from booming shale oil production in the U.S., outside the
producer group's control. That's also left OPEC members reluctant
to cut their output in an increasingly competitive environment.
"[Mr.] al-Naimi is going to explain to [Mr.] Ramirez that not
much can be done at the moment and it is a cycle the market is
going through," said another Saudi official.
Of all of OPEC's members, Venezuela has been the most vocal
about the rapid slide in oil prices since June, making an unheeded
call for an emergency meeting of the producer group last month.
Even before oil prices plummeted this summer, Venezuela was
battling a weak economy, but the steep drop in the commodity that
makes up to 96% of the country's export revenues has compounded the
economic challenges it faces. President Nicolás Maduro has seen his
popularity plummet to a record low, polls show, as dollar shortages
have led to a precipitous decline in the value of the local bolivar
currency and contributed to scarcities of food and consumer
goods.
The average price of OPEC's oil fell to its lowest level since
October 2010 earlier this week, sliding to $78.67 a barrel,
according to data from its secretariat published Wednesday.
Deutsche Bank estimates Venezuela needs a much higher oil price of
$121 a barrel to balance its annual budget, one of the highest
break-even prices in OPEC.
Saudi Arabia requires a lower oil price to balance its budget
and has a healthier economy that could endure lower oil prices for
longer. By far the most powerful member of OPEC, the Kingdom has
remained quiet about the steep drop in oil prices.
That silence is contributing to a rift emerging within the
producer group ahead of its next semi-annual meeting later this
month. Other OPEC members besides Venezuela, such as Libya, have
called for a reduction in the group's output to help support prices
but Saudi Arabia has made it clear it will not act alone.
Write to Summer Said at summer.said@wsj.com, Kejal Vyas at
kejal.vyas@wsj.com and Sarah Kent at sarah.kent@wsj.com
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