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Venezuela Is Begging OPEC To Change Its Policy. All Signs Are…It Will Not.

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Venezuela has once again embarked upon an “OPEC diplomacy tour” in an effort to gain strategic allies as the country suffers the impact of the ~50% fall in the oil price since June and a host of domestic challenges stemming from President Nicolas Maduro’s socialist policies. Venezuela and other suffering non-Gulf OPEC members have repeatedly urged the group to cut its production to alleviate the impact of lower prices on their ailing economies. Meanwhile, OPEC’s titular head, Saudi Arabia, and its fellow Gulf states have consistently reiterated its market share defense strategy. There are no indications that this position will change any time soon.

Venezuelan Oil Minister Asdrubal Chavez is heading the delegation, meeting with Saudi Arabia’s Deputy Oil Minister Prince Abdulaziz bin Salman today following talks in Tehran yesterday with Iranian oil representatives.

Before being appointed as Venezuela’s oil minister last September, Asdrubal Chavez had been with PDVSA for the entirety of his career, with his principal focuses being refining and supply.

On Tuesday, Iran’s state news agency INRA reported that Chavez met with Iran’s Oil Minister Bijan Zanganeh for discussions that included the potential for higher Iranian supplies.

“We expect the members of OPEC to pave the ground for [an] increase of Iran’s oil production that will reach global markets when sanctions are lifted,” INRA reported Zanganeh as saying during the meeting.

Reuters is reporting Tuesday morning that the Venezuelan delegation will meet Saudi’s deputy oil minister, as Oil Minister Ali Naimi is currently in south Korea.

The Venezuelan foreign ministry said via Twitter on Tuesday that its delegation had arrived in Saudi Arabia “to hold bilateral and working meetings.”

This marks the second “OPEC diplomacy tour” in which Venezuela has engaged since the oil price plunge. Venezuela is among the countries most deeply impacted by the fall in prices. Additionally, the country is beset by chronic shortages of basic goods, soaring inflation and an overall slowing economy.

Venezuela contains the world’s largest crude reserves and depends on oil exports for nearly 95% of foreign currency earnings.

Prior to OPEC’s November 27 meeting in Vienna, where the group- led by Saudi and the Gulf States- decided to maintain its 30 M/bd production quota, Venezuela was among the most ardent proponents of a cut in OPEC’s output quota.

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Venezuelan President Nicolas Maduro

The January diplomatic tour led by President Nicolas Maduro was fruitless. Meetings with officials in Saudi Arabia, Qatar and Algeria, failed to persuade Gulf OPEC countries to amend their market share protection strategy. Each foreign visit in the January tour was marked by a juxtaposition of Maduro’s “beating of his chest” with 1) the continued fall in oil prices and 2) the lack of commensurate enthusiasm from his counterparts in the countries he visited (with the arguable exceptions of Iran and Russia).

OPEC’s next meeting is on June 5 in Vienna. Iran, Nigeria and a Libyan OPEC official have urged the 12-member group to consider production cuts. Conversely, Kuwait – in anticipation of the likely position of the other Gulf OPEC members – has said the policy will remain unchanged.

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