Price crash puts Colombian, Venezuelan crude blends underwater
Baku-APA. Jan 21 A more acute crude price slump this month has put several South American countries in the difficult position of selling oil for less than what it costs to produce, according to traders and sources at three companies in Colombia and Venezuela, APA reports quoting Reuters.
So far, the most affected crudes are blends formulated with naphtha and other imported diluents. But if the price rout that shows few signs of ending soon persists, other grades could be hit too, the sources added, potentially putting more pressure on public finances in the oil-dependent countries.
Some of the most known South American blends, which normally trade at significant discounts to benchmark Brent that has tumbled to under $30 per barrel, are fast becoming a type of 'negative oil' in a global glut.
Red numbers have also affected Canadian grades and U.S. shale crude, a change that increases the pressure on producers to consider shutting wells rather than running at a loss.
Among the varieties already affected in South America are Venezuela's Diluted Crude Oil (DCO), which is now selling around $15 a barrel and Colombia's best seller Vasconia, offered at below $21 in spot deals LCO-VAS, sources from producing firms said.
South America's fourth largest oil producer, Ecuador, is also under breakeven point, President Rafael Correa said, which is forcing the country into fiscal cuts.
"We have a crude price that is not even covering production costs, which are $24 per barrel," Correa told journalist on Wednesday.
The latest figures from Venezuela's state oil company PDVSA show the average production cost for all its crudes is $18 a barrel, while Toronto-listed Pacific Exploration & Production , Colombia's largest private operator, said its production cost including diluents, transportation and taxes averaged $20 to $22 in the third quarter of 2015.
"Last week we were right at the breakeven point," said a source from Pacific. "But we are currently below that line."
Pacific, Colombia's state-run firm Ecopetrol and PDVSA buy diluents on the open market, where naphtha and natural gasoline prices are currently around $35 per barrel, to make exportable blends.
The firms did not immediately respond to a request for comment.
Venezuela exports around 1.9 million barrels per day (bpd) of crude, Colombia 750,000 bpd and Ecuador 430,000 bpd.
Before the latest price tumble of 20 percent this month, Ecopetrol and Pacific reduced sales of heavy Castilla LCO-CAS while increasing purchases of diluents to formulate more medium Vasconia, which is better priced but has a bigger imported component.
The strategy, however, has not been enough to halt the revenue slide, according to the sources. High taxes and royalties, along with costly logistics keep production costs relatively high, they added.
Venezuelan President Nicolas Maduro asked PDVSA on Tuesday to make a big effort to bring down production costs. "How many countries in the world can maintain oil production at $22 per barrel? A few or none," he said.
In Venezuela, one of the crudes still making some profit is so-called syncrude, which can be sold at a premium after running through upgraders that turn extra heavy oil into a lighter one.
Traditional Boscan heavy crude, meanwhile, is also below breakeven levels estimated to be about $16 a barrel.
"If Boscan heavy crude is being sold around $12 per barrel, Orinoco belt's DCO cannot have any profit after taking diluent costs into the account," one of the sources said.
A barrel of a Venezuelan DCO made with naphtha is usually sold 15 percent cheaper than a crude blend, a government source confirmed. So while Venezuela's price for Merey blend, an extra heavy crude from the Orinoco belt produced by PDVSA and its joint ventures, is currently around $17.25 a barrel, DCO cannot be sold over $15 per barrel.
According to Deutsche Bank, which has warned about Venezuela's "dangerous" oil prices, a $30 average crude price in 2016 would widen the country's foreign exchange deficit to $34.2 billion from a previous deficit estimated at $18 billion.
Related news releases
- 28.06.2017Fed's Yellen expects no new financial crisis in 'our lifetimes'
- 28.06.2017Tillerson to meet UN Chief, Jordanian King at State Department on wednesday
- 28.06.2017Helicopter attacks Venezuela's pro-Maduro Supreme Court
- 28.06.2017Trilateral agreement on Syria helping reduce level of violence — UN envoy
- 28.06.2017University of Texas at Dallas evacuated due to bomb threat
- 27.06.2017Senate postpones planned healthcare vote until after July 4 recess
- 27.06.2017At least 34 injured after New York city subway train derails - Fire Department
- 27.06.2017Children at risk in Syria, Iraq battlegrounds, US says
- 27.06.2017No apparent violations of nuclear agreement by Iran - US Ambassador to UN
- 27.06.2017Twenty-two million Americans would lose health coverage under Senate bill: CBO
- 27.06.2017Oil little changed after three-day gain, supply glut weighs
- 27.06.2017White House spokesman Spicer draws heat off camera
- 27.06.2017U.S. says it will work with travel industry to implement travel ban
- 27.06.2017Trump says Obama 'colluded' on Russia, without giving evidence
- 26.06.2017In victory for Trump, Supreme Court revives Trump travel ban
- 26.06.2017Supreme Court partially reinstates Donald Trump's travel ban
- 25.06.2017Donald Trump congratulates Muslims on Eid al-Fitr holiday marking end of Ramadan
- 25.06.2017Colombian police arrest 8 suspects in connection with Bogota shopping mall blast
- 25.06.2017One dead, one injured in California shooting
- 25.06.2017Clashes between rival criminal gangs in Mexico leaves seven people dead
- 25.06.2017US issues arrest warrants for five former VW Managers in Emissions fraud scandal
- 24.06.2017Plane crashes into empty Florida daycare building; 1 killed
- 24.06.20175.7-magnitude quake hits off Coracora, Peru
- 24.06.2017Four Venezuelan parliament workers hurt in Caracas clashes
- 23.06.2017Trump nominates Robert Wood Johnson as ambassador to UK
- 23.06.2017Canadian leader says Muslims must fight terrorism
- 22.06.2017Trump has no recordings of talks with FBI ex-director Comey
- 22.06.2017Trump says 'we have a great relationship with China' after critical tweet
- 21.06.2017US crude falls to lowest level in 10 months
- 21.06.2017US F-16 catches fire during takeoff in Texas
- 21.06.2017U.S. Attorney General Sessions hires private attorney
- 21.06.2017UN praises Turkey's hospitality towards refugees
- 21.06.2017Canada: Anti-terror law beefs up cyber threat powers
- 21.06.2017U.S. shoots down drone close to Iraqi-Syrian border
- 21.06.2017U.S. imposes new sanctions on Russia over Ukraine
- 21.06.2017New Mexico Lab Shutdown Endangers US Nuclear Arsenal
- 20.06.2017U.S. State Department 'mystified' by Gulf states on Qatar
- 20.06.2017Argentina police seize cache of hidden Nazi artifacts
- 20.06.2017Four Mexican federal police killed in ambush in Guerrero
- 20.06.2017Otto Warmbier, US student released from North Korea has died
- 23.01.2016China taking 'self-isolating' steps in South China Sea: Pentagon
- 23.01.2016Haiti postpones presidential election as violence erupts
- 23.01.2016Five killed in Canada school shooting, suspect in custody - UPDATED
- 22.01.2016US begins tightening visa requirements after terror attacks
- 22.01.2016Boeing to cut 747-8 production, take charge in Q4
- 22.01.2016Obama promises Merkel to 'substantially' support refugee efforts: Berlin