Oil supply/demand
If I may respond....a contributing factor has been the Venezuelans "shift" in production policy in the last couple years..
For years and years........until, maybe two years ago, Venezuela's oil conglomerate believed that it was better off NOT attempting to produce (all the oil they could) and SELLING all the oil they could on the open market....that they would realize greater long-term revenues by selling less at higher prices...
About two years ago, it was suddenly decided that oil was fungible, and that it would be better policy to pump as much as possible, and sell as much as possible going forward....even at lower prices..
I'm not sure why this change occured, but I know it did....
Ironically (or maybe not)....oil priced have "tanked" (no pun intended) every since....oil makes up about 50% of Venezuelan export revenues, and a significant % of gvt. revenues each year (I think between 30-40%).....last year, the Venezuelan gvt. budgeted a per barrel price of $18....on average, per barrel sold for $ 11-12...so you can imagine the pressure the Venezuelan gvt has been under to collect additional revenue from oil...and, obviously, this has been accomplished by producing/selling full-throttle (self-defeating..., I know)
Also, This shift coincides with Venezuela opening up (much more of their) oil production to foreign producters (mostly U.S.) 2/3 years ago.....this has put more supply on the market as well...and much more is in the pipeline...(lots of funded projects)....As you probably know, Venezuela oil company is a mostly-state owned monopoly...and their U.S. distribution arm is CITGO (although I think they recently sold some/all of it)
Venezuela has an unbelievable amount of oil...until recently, they were the largest crude supplier for the U.S..They probably will be again soon...Between Iraq/Venezuela/Saudi Arabia/Mexico....lots of oil there, and no one wants to give up share anytime soon (no matter what they say in public...) |
