10-10-04

Venezuela won't increase oil supplies to the United States and believes oil prices will never again return to the levels of a few years ago, the country's top oil official said.

"I don't think they will fall below $ 30 per barrel in the coming months," Petroleos de Venezuela (PdVSA) President Ali Rodriguez Araque told.

Venezuela ranks third among suppliers of the US market, where it sends 54 % of its exports. Rodriguez blamed spiralling prices -- about $ 50 a barrel -- on a speculative process set by what he called "paper oil barrels"-future markets. He predicted that prices would stabilize in a "moderation trend" over the next few months "but never go down to the levels of the past."

"There are reasons to believe that until the end of the year there will not be a sharp drop in prices. There are many reasons to expect a decline in prices and demand during the second quarter of next year," said Rodriguez, a former secretary-general of the Organization of Petroleum Exporting Countries.

The global demand for oil stands at 81.128 mm bpd, while the OPEC members and independent producers currently pump a combined total of 84 mm bpd. Of this amount, 34 mm barrels are supplied by the oil cartel.

"Actually, there is a 3 mm barrel daily supply excess," he said.

But while the real market works with the actual demand, speculators negotiate 100 mm to 160 mm bpd, the Venezuelan executive said.

Rodriguez also said that supplies of refined oil products to the Mexican Gulf areas recently hit by hurricanes were temporarily reduced but the flow was being restored gradually. Prices, he said, also have been influenced by limits in US oil refining capacity, which is not enough to cover domestic demand.

Rodriguez came to Brazil to attend an Oil and Gas Conference and to meet with executives of Brazil's state-owned oil conglomerate Petrobras to discuss possible joint enterprises.

PdVSA is one of the world's largest oil companies, with domestic reserves of 78 bn barrels of oil and 235 bn barrels of extra-heavy crude. The company plans to investment up to $ 37 bn over the next five years. By 2009, PdVSA would raise its pumping capacity to 5 bn bpd. Its exports currently represent half that figure.

At the end of 2002, when the company was paralysed by a labour strike, production dropped dramatically to barely 25,000 bpd, Rodriguez said in a speech at the conference. He called for joint enterprises by Latin America's main oil companies, including Pemex of Mexico and Brazil's Petrobras.

Source: Associated Press