Venezuela, sanctions case sidelined in Vienna

Venezuela's efforts to persuade Opec to discuss the impact of US financial sanctions on oil market stability have so far been ignored as the group heads toward raising production.

Venezuelan energy minister and state-owned PdV chief executive Manuel Quevedo, who is heading the Venezuelan delegation at the Opec meeting in Vienna, said today that US sanctions against PdV imposed in August 2017 are a "direct attack against the stability of the oil market."

But Quevedo's appeal for Opec solidarity in opposing the US sanctions has gained little traction among other Opec producers, presidential palace and energy ministry officials in Caracas told Argus.

"Oil prices are up and the big producers want to increase production," an energy ministry official said. "US sanctions may be hurting Venezuela, but other producers are benefiting from Venezuela's falling output and oil markets aren't unstable," the ministry official said.

"These circumstances undercut Venezuela's efforts to persuade other producers that the US sanctions against Venezuela threaten oil market stability," the official added.

President Nicolas Maduro feels that Venezuela has been sidelined as Saudi Arabia negotiates an output increase with Iran and other producers, a palace official said.

Venezuela and Iran both are under US sanctions, but the Saudis have been more concerned with reaching a deal with Tehran to facilitate an output increase than with considering Venezuela's proposal, the palace official said.

"It appears that the Saudis, Russians and the others have ignored Venezuela's proposal that Opec must discuss the impact on global oil markets of the US sanctions against Venezuela before reaching any agreement to raise production from individual quotas assigned in the current production agreement," the palace official added.

Venezuela "categorically rejects" proposed output increases pushed mainly by Saudi Arabia and Russia, which has fostered closer ties with Riyadh since Saudi crown prince Mohammed bin Salman took power, the palace official said.

Maduro feels betrayed by Russia's insistence on raising output, the palace official added. "Russia has important oil investments in Venezuela with PdV through Rosneft that could be affected if an Opec output increase pushes oil prices lower," the official said.

Venezuela's crude production is currently around 1.2mn b/d, more than 700,000 b/d lower than a year ago, according to Argus estimates. Official estimates remain at 1.5mn b/d. Venezuela's Opec quota is 1.977mn b/d.

A meeting of the Joint Ministerial Monitoring Committee (JMMC) ended today with Saudi oil minister Khalid al-Falih and Russia's Alexander Novak both saying a recommendation for a 1mn b/d production increase will be proposed to full meetings of Opec and non-Opec ministers.

Al-Falih said the proposed increase would be "gradual" and that the increase would be from actual production, rather than from the quota ceiling, which is higher.