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jose chalhoub

Venezuela political turmoil and a perfect storm of oil price war hovering over Maduro

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Today  was another high expectations day in Venezuela. A nationwide protest was called by Juan Guaido after his recent visit to the White House seeking to revive the street vibes and his strategy in order to call for fresh presidential elections, ending up repelled again by police and military units.  Meanwhile the government called for 2 simultaneous mobilisations while at the same time directing military drills in diverse spots of Caracas and other cities in a clear muscle flexing and fear mongering strategy to demobilise the people set to take the streets today.

All this while the country still is hit with power outages, fears of the corona virus entering the country, crippled finances, crashing oil production and with high levels of uncertainties and anxiety over what would happen in the coming weeks and months in Venezuela and regarding its political situation. And it seems particularly hard for the government of Maduro how to deal with this perfect storm of an all out oilprices war between Russia and Saudi Arabia pushing so far prices to 33-34$ today without any clear outlook on how long this will last and with production costs per barrel for Venezuela on 30 dollars more or less and having to sell at huge discounts to ROSNEFT and other minor importers due the ongoing US sanctions, also coupled with the problems for China due to the coronavirus slashing demand and other financial support to Venezuela while the country per se Venezuela is not ready to deal with the entrance of the virus due to the crisis of its public health services so far.

Maybe this frame of the ongoing oil price confrontation if continues for the next weeks and months will be a powerful catalyst for more damages to the government Maduro still presides despite the already crumbling oil industry in Venezuela without much say even in OPEC meetings in the last years. Lets see if Guaido and his supporters in the White House and other ally nations can capitalise this scenario currently going on in Venezuela. 

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I am someone that not very often writes a comment on any board.

Wrt the current drop in oil prices, which is unprecedented since the last few decades, I have been wondering what could be at play here...

1) it could be “game theory” in real life... Since Russia isnt willing to agree with the OPEC, this is a move from the OPEC to SIGNAL to Russia it needs to comply or face a situation of depressed oil prices. The fleet of vessels leased by SA is another signal showing it “aint bluff”. 

2) the MAIN question is why Russia is suddenly so eager to not comply with the OPEC. The lower demand, as the consequence of the totally overhyped Corona virus (which is just another flu actually), may be one of the issues... But dont forget that this can also be an OPPORTUNITY to attack the US Shale industry. It would hit the USA enormously if shale would be killed off due to low oil prices, In fact.., it may even kill off a lot of other green companies. How viable are electric vehicles and windmills when oil is at 30 USD or below? But in order to kill this “green” industry, it will likely need a few years of depressed oil prices...

3) Another complexity is the fact that russian elections will be held in short time. With the destabilizing Ruble and oil in freefall, Putin wont make many friends in politics...So he will need to come to some consensus.

My thoughts are that Russia (Putin) will go back around the table with the OPEC. This to find some way to still stabilize the oil price and also be able to attack the US shale. I think the best pricepoint for this to do will be an oil price of around 35 to 40 USD. It will slowly bring the shale industry to its knees (and other “green companies”). Lower than that will risk Putin to destabilize Russia.... 
 

So I dont think oil will long term be below 35 to 40 dollar...

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7 hours ago, ErikS said:

I am someone that not very often writes a comment on any board.

Wrt the current drop in oil prices, which is unprecedented since the last few decades, I have been wondering what could be at play here...

1) it could be “game theory” in real life... Since Russia isnt willing to agree with the OPEC, this is a move from the OPEC to SIGNAL to Russia it needs to comply or face a situation of depressed oil prices. The fleet of vessels leased by SA is another signal showing it “aint bluff”. 

2) the MAIN question is why Russia is suddenly so eager to not comply with the OPEC. The lower demand, as the consequence of the totally overhyped Corona virus (which is just another flu actually), may be one of the issues... But dont forget that this can also be an OPPORTUNITY to attack the US Shale industry. It would hit the USA enormously if shale would be killed off due to low oil prices, In fact.., it may even kill off a lot of other green companies. How viable are electric vehicles and windmills when oil is at 30 USD or below? But in order to kill this “green” industry, it will likely need a few years of depressed oil prices...

3) Another complexity is the fact that russian elections will be held in short time. With the destabilizing Ruble and oil in freefall, Putin wont make many friends in politics...So he will need to come to some consensus.

My thoughts are that Russia (Putin) will go back around the table with the OPEC. This to find some way to still stabilize the oil price and also be able to attack the US shale. I think the best pricepoint for this to do will be an oil price of around 35 to 40 USD. It will slowly bring the shale industry to its knees (and other “green companies”). Lower than that will risk Putin to destabilize Russia.... 
 

So I dont think oil will long term be below 35 to 40 dollar...

The advantage of shale is they can ramp up and down rather quickly compared to conventional drilling. You can’t kill shale, just slow it until prices rebound. The shale industry is already down around 20% in well drilling and completions but amazingly has just slowed growth but not production which is still growing. I don’t think most people can quite grasp that fact. Shale is much more resilient than during the last big price crash.

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1 minute ago, Boat said:

The advantage of shale is they can ramp up and down rather quickly compared to conventional drilling. You can’t kill shale, just slow it until prices rebound. The shale industry is already down around 20% in well drilling and completions but amazingly has just slowed growth but not production which is still growing. I don’t think most people can quite grasp that fact. Shale is much more resilient than during the last big price crash.

Do you ever actually read what you write?

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Typically Republicans are not good at reading data. You need Trump to tell you how to think. Start by learning the impact of science and data and how they relate to technology. This is a bit out of your area of expertise but attempt to struggle on and catch up.

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23 minutes ago, Boat said:

Typically Republicans are not good at reading data. You need Trump to tell you how to think. Start by learning the impact of science and data and how they relate to technology. This is a bit out of your area of expertise but attempt to struggle on and catch up.

Well, as a qualified engineer who has logged 36 years in my respective field, and hold a Master’s degree in Environmental Policy & Management, I feel, rightly or wrongly, that I have a fairly good handle on reading data, and the impact of science and how it impacts technology.

Your childish, pissy comments reflect more on your inability to debate as an adult and casts doubt on your ‘technical ability’.

Furthermore, you are making the assumption that I am a Republican. Again,  this shows your inability to debate using facts as opposed to your own assumptions.

Let’s leave it at that.

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Maybe the the prices will stay low enough, long enough, that Maduro will fall.  I'm betting he makes most of his money through other illicit dealings at this point, however, it could be the catalyst, that diminishes interest from Russia and China.  Locally, no fuel, combined with the corona scare, may get the people into the streets, and backing up Guaido and supporting each other, and a better future.

Maybe the prices will stay low enough, long enough, that the world becomes (is?) to "busy" and turns it's back on Venezuela, as it spirals down even further.  

 

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