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To: VLAD who wrote (26534)	7/25/1998 10:35:00 PM
From: P.Prazeres	Read Replies (1) \| Respond to of 95453

Venezuela to Delay Oil Cuts, Pledges Compliance (Update2) Caracas, July 24 (Bloomberg) -- Venezuela, the biggest supplier of crude oil to the U.S., said it will delay cutting oil output, raising doubts that it plans to adhere to agreements limiting production to boost prices. Venezuelan production will fall to the target production level of 2.845 million barrels a day by the middle of next month at the earliest, said Deputy Energy and Mines Minister Dolores Dobarro. Officials at the state oil company have previously said the cutback would be in place by August 1. ''They're getting cold feet,'' said John Saucer, an energy analyst with Salomon Smith Barney in Houston. ''Venezuela is having second thoughts about implementing the cuts they've promised.'' Venezuela's government is facing a mounting cash crunch after its sale of state aluminum companies fell through this week and its borrowing costs soar amid concerns it may devalue its currency. While the government had agreed to cut production by 200,000 barrels a day at one meeting of oil producers, and then agreed to a second cut of 125,000 barrels, it's delaying a third cut of 200,000 barrels a day, to which it agreed in last month's Organization of Petroleum Exporting Countries summit in Vienna. Markets Oil prices showed little reaction to Venezuela's statement. The contract for September delivery of crude was down 3 cents at $13.85 a barrel on the New York Mercantile Exchange. ''The 325,000 cut seems feasible for them,'' said Saucer. ''It's the next 200,000 that's the problem.'' Newspapers reported earlier this week that the country's production was about 3 million barrels a day, meaning that output is still about 155,000 barrels a day above that promised in Vienna. ''Venezuela will reduce its production to the stated goal of 2.845 million barrels a day,'' said Dobarro. ''We will comply with the agreements to reduce production.'' Still, a mounting financial crisis is threatening the country's adherence to the agreement, especially following two setbacks this week. On Wednesday, Moody's Investors Service Inc. cut the country's credit rating, questioning its willingness to pay its debt, and raising its future costs of borrowing. Yesterday, the government's second attempt in four months to sell four state-aluminum companies for $1.46 billion in cash and debt, collapsed. That could force the government to borrow more money to finance its $3 billion budget deficit. ''At this point, only Venezuela seems to be sending mixed signals about the agreement,'' said Saucer. ''All of the other countries are making the cuts and putting the best face forward.'' Venezuelan Compliance Doubts about Venezuelan compliance to the agreement have been mounting this week, especially after Petroleos de Venezuela SA officials said next year's exports will average about 3 million barrels a day. First half exports are projected at 2.845 million barrels a day, while the second half's exports are slated for 3.155 million barrels a day. As domestic consumption is about 350,000 barrels a day, the exports goals imply average output of 3.35 million barrels a day, substantially above the country's promise to curtail output through July 1. PDVSA officials warned earlier this month that the third cut of 200,000 barrels a day would be phased in, as it would require time to shut down fields, as well as meeting already contracted deliveries of oil. Dobarro reiterated in a telephone interview that average oil production for the year will be 3.09 million barrels a day. She denied a report by Bridge News that said Venezuela wouldn't fully comply with agreements with oil producers to cut exports. ''The cuts will perhaps not be in full effect by Aug. 1,'' as President Luis Giusti of state oil company Petroleos de Venezuela SA had announced, she said. ''I'd say the production goal will be reached by mid-August, perhaps early September.'' The cuts Giusti promised were to be in effect by July 1, according to an agreement reached by the Organization of Petroleum Exporting Countries and non-OPEC members in Vienna. Dobarro's comments would indicate Venezuela will delay implementation of the agreement a second time. The delay in meeting the latest agreement is because of Venezuela's obligation to meet oil deliveries and contracts it had previously agreed to, she said.