Skip to comments.Fears of Venezuela Default Grow Amid Drop in Oil Prices
Posted on 02/02/2016 5:22:49 AM PST by thackney
The plunge in the price of oil is causing more investors to bet that Venezuela will default on its $120 billion pile of foreign debt, an event that would trigger a messy battle over the country's oil shipments and deepen its economic and political crisis.
Despite Venezuela's worst economic slump since independence from Spain, the socialist government has continued to pay bondholders on time. President NicolÃ¡s Maduro this week reiterated the country's intention to honor its debt.
Few investors doubt Venezuela's willingness to pay. In recent years, it has paid bondholders partly by drastically reducing the amount of dollars it uses to import goods, adding to widespread shortages. What's increasingly in doubt, however, is the country's ability to pay.
"Venezuela is in an economic hole; the oil prices are just aggravating the mess," said Anders Faergemann, who manages $20 billion of emerging-market fixed-income debt, including Venezuela's, at Pinebridge Investments in London.
The price of oil--which accounts for 96% of Venezuela's export earnings--recovered slightly on Thursday to nearly $30 a barrel, but it is still down sharply on the year. Oil futures signal the price will remain at about $32 a barrel for the foreseeable future. That's a far cry from the $100-plus levels that Venezuela enjoyed for years.
Venezuela's heavier oil fetches even less on international markets and is down to about $23 a barrel, near its break-even production point of about $17 to $18 a barrel.
A default in 2016 "is becoming increasingly difficult to avoid," said Barclays economist Alejandro Arreaza in a report on Venezuela this week. If oil stays at $32 per barrel, Mr. Arreaza estimated that Venezuela will need to use 90% of its oil income this year just to meet its obligations, including sovereign debt and money owed to China.
(Excerpt) Read more at wsj.com ...
They’ll all be heading el Norte
I think someone should teach this to Sanders voters. These kids have no idea what they’re going to unleash on all of us.
Venezuela Begins Mission to Request OPEC Cut Production
Venezuela’s Minister of Petroleum and Mining and President of the state-run PDVSA, Eulogio del Pino, began his trip to OPEC member and non-member countries in order to deliver a plan aimed at stabilizing global oil prices, which have plunged by more than 70 percent over the past 18 months.
Del Pino arrived in Moscow Monday and met with his Russian counterpart Alexander Novak. After his visit to Moscow, he will will continue on to Qatar, Iran and Saudi Arabia, which are among the world’s largest oil producers.
Venezuela has been calling for an emergency OPEC meeting since oil prices began falling in 2014. However, Saudi Arabia has been insistent on maintaining low prices due to increasing shale production in the U.S. and the competition of a post-sanction Iran entering the market...
The smart ones are already here.
OK. so what are Vz dollar-denominated treasuries
Is that Bernie the commie?
“The plunge in the price of oil is causing more investors to bet that Venezuela will default on its $120 billion pile of foreign debt, an event that would trigger a messy battle over the country’s oil shipments and deepen its economic and political crisis.”
See what happens when you elect a capitalist? This is why you need the Socialist party in power. They care for the people. /what will come out of the mouths of the socialists in Venezuela.
and they brought their money
...Venezuela’s heavier oil fetches about $23 a barrel...
...its break-even production point of about $17 to $18 a barrel...
There was a time when 5 bucks a barrel was a decent profit,
but I guess not anymore; especially if you had your eggs
in one basket and become dependent on the higher profit.
What will they do?
Increase production = flood the market = drive prices down further...
Bad situation they have gotten themselves into.
I am friends with one such family. They got out shortly after Chavez took over. Chavez was going after families that either were in high places before him or were aligned with his political enemies.
I’m shocked. Who could have possibly seen this coming?
A friend from my refining days got an assignment to VZ to manage a fertilizer plant. It was half owned by an Italian oil company and needed refurbishment.
As things turned politically ugly, the US partner sent a Lear jet unannounced to a local airport and he and his wife got aboard, leaving their apartment and many of their possessions behind.
Venezuela’s has multiple problems. They are pumping all they can and have no money to invest to increase production.
the state is more than $50 billion in arrears to private companies...
Oil accounts for over 95 percent of the country’s export earnings....
Venezuela’s inflation rate will top 720 percent this year, up from 275 percent in 2015...
The official exchange rate still stands at 6.29 bolivars to the dollar, but on the black market, one dollar costs upwards of 800 bolivars, a rate four times higher than a year ago....
But a debt default may not be imminent. Barclays believes that Venezuela will meet the more than $2 billion due in February. The trouble could, however, come later this year. PDVSA has bonds maturing in October, which are currently selling at 57 cents on the dollar, a strong indication that investors think the company will fail to meet its obligation....
Venezuela needs oil at $125 a barrel to match their spending.
Two words: toilet paper.
It should be a “Requirement” to Graduate from ANY institution of Higher Learning, that ALL Students spend 30 days in a Utopian Paradise such as Venezuela.
Yes. Remember when Chavez took over Chevron’s facilities?
This was a fertilizer “prill” plant.
When nat gas was $6-$8/MM, Vz gas was $.50.
The owners of the plant shipped their product to the US and made out well...
“I think someone should teach this to Sanders voters. These kids have no idea what they’re going to unleash on all of us.”
You are so right. I heard a news clip reported from the Sanders caucus in Iowa. The reporter asked young people if they could define socialism. “Bernie Sanders is the socialist candidate. Can you define socialism?” None of the kids heard in this report could. They sounded utterly clueless. This outcome is what national education standards has purposefully wrought.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.