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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: sand wedge who wrote (26840)	7/31/1998 7:17:00 PM
From: Snowshoe	Read Replies (1) \| Respond to of 95453

Venezuela unlikely to make more oil cuts - sources By Tom Ashby CARACAS, July 31 (Reuters) - Venezuela is deeply divided over the issue of oil production cuts and is unlikely to commit to any further output restraint, despite calls for more cuts from some of its OPEC partners, senior Venezuelan oil industry sources said on Friday. Venezuela, together with Saudi Arabia and non-OPEC member Mexico, has led two rounds of production cuts this year aimed at shoring up sagging world oil prices, though it is paying a heavy political price domestically, with opposition groups and oil unions vehemently protesting the cuts in this election year. The domestic political flak has been accompanied by doubts within the Venezuelan oil establishment about the effectiveness of the strategy. ''We are watching the market and trying to see if there is anything that tells us if (the cuts) make sense or not,'' a senior Venezuelan industry source told Reuters, asking not to be named. ''I can assure you that for every guy that is thinking about more cuts, there are other countries who are saying, 'this isn't working.' Why would people cut more if they haven't cut what they were supposed to?'' Since the first round of cuts began in April, there have been constant arguments about compliance, and analysts reckon that only about 1.8 million barrels per day (bpd) of the 2.6 million bpd cuts promised by July has actually been delivered. Kuwaiti Oil Minister Sheik Saud Nasser al-Sabah said earlier this week that producers should cut output again if prices do not rise substantially by November, when OPEC is due to meet again. But Venezuelan officials see the continued weak prices as a sign that the quotas are not being respected. ''If the cuts made by Venezuela do not achieve a strengthening of prices due to continual violation by other producers, and if -- after making an analysis -- we decide to open our wells, we should do it publicly,'' senior industry adviser Alberto Quiros, who was part of Venezuela's delegation in the Riyadh talks, wrote in a recent newspaper article. Having been an enthusiastic backer of the first round of cuts in April, Venezuela's support has appeared to wane. In early July, Luis Giusti, president of state oil company Petroleos de Venezuela (PDVSA), accused Iran of violating the Riyadh pact by 230,000 bpd. In mid-July, oil minister Erwin Arrieta said Venezuelan production was still around three million barrels per day (bpd), or 155,000 bpd above the agreed level, and that the cuts would be implemented progressively. And this week, Venezuela's budget office released a controversial set of figures for oil exports in 1998, implying that Venezuela planned to violate its agreed output levels by an average 300,000 bpd for the whole year. The production restraint strategy flies in the face of Venezuelan policy in recent years. Not long before the output cuts were agreed, PDVSA's Giusti argued that, with less than half of the world's oil supply, OPEC should forget the idea that it could control the oil market and instead get on with reclaiming the market share it lost through the failed policy quotas. Giusti has repeatedly spoken of Venezuela's ability to withstand a price war, arguing it has spent over 10 years building up a downstream industry in the United States and Europe, ensuring all its relatively cheap-to-produce barrels find a home even in the weakest of markets. Meanwhile, the domestic resistance to the cuts is mounting. The oil unions are planning a 12-hour strike next week to protest the cuts, which they say are creating up to 5,000 job losses in the service sector. ''As far as I can see we are coming into direct conflict with the plan and this is very damaging for the country,'' said Andres Sosa, former PDVSA president, in a recent newspaper interview. ''What we should do is, very discreetly, leave the OPEC agreement and quietly get on with our expansion plans.''