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Page added on November 16, 2017
Dan Yergin on why Venezuela could cause a ‘big shock’ to the markets
If the global oil market suddenly loses Venezuela’s 2 million barrels of daily oil production, it would be “a big shock to the system,” according to Dan Yergin, vice chairman of IHS Markit.
“It would certainly be a very tight market, because of course you already have production restraints by OPEC and non-OPEC,” Yergin told CNBC at the Abu Dhabi Petroleum Exhibition and Conference on Tuesday.
Oil markets are increasingly worried over potential supply constraints as the economic turmoil in Venezuela deepens. Production in Venezuela has been falling and the economic difficulties have affected further investments in the sector. As the economic situation deteriorates, production might continue to fall from its maximum potential, thus limiting the availability in the market.
Venezuela, an OPEC nation and one of the biggest oil producers in the world, has conducted debt renegotiations with foreign investors since Monday. However, it is unclear whether President Nicolas Maduro will succeed in these talks.
S&P Global declared Tuesday that Venezuela had defaulted on its debts after missing a $200 million interest payment to global bond investors. This could have been the first of many defaults on more than $60 billion in international bonds – which the president is currently trying to restructure.
Caracas has struggled to refinance its debt because U.S. banks cannot buy new Venezuelan bonds due to sanctions imposed by U.S. At the same time, the Venezuelan economy has been in recession for four years, where food shortages, the lack of U.S. dollars and the depreciation of its own currency, has sent inflation soaring.
“Venezuela is an important (oil) producer. It has lost a lot of the talent, a lot of its capabilities, what its production really is, and it seems on verge of turmoil,” Yergin told CNBC.
“Caracas seems to not be able to reconcile with its population and if you are a middle class person and you have the opportunity to leave Venezuela, you’re leaving Venezuela. So they are losing a lot of the skills and the capabilities in the economy,” he added.
However, Venezuela isn’t the only factor traders are watching. The instability in the Middle East, including the deterioration of the relationship between Saudi Arabia and Iran, is another headache.
If you have two or three different factors coming together like this, there could be large short-term ramifications for the oil market, Yergin warned.
Oil prices were lower on Wednesday morning, mostly due to lower supply and demand forecasts for 2018.
35 Comments on "Dan Yergin on why Venezuela could cause a ‘big shock’ to the markets"
Davy on Thu, 16th Nov 2017 7:07 am
Yea, that is a no brainer, so since Yergin said so it is something. lol. This is the part of peak oil dynamics I speak of. The oil complex is not healthy and those who think peak oil issues dead are scratching their asses and picking their noses.
Anonymouse1 on Thu, 16th Nov 2017 11:26 am
Jerkin really nails the walking corpse look. Whether his deathly pallor is a metaphor the state of amerikan capitalism, or the uS oil cartel he shills for, is hard to decide.
GregT on Thu, 16th Nov 2017 11:32 am
“Ten years from now, twenty years from now, you will see, oil will bring us ruin… It is the devil’s excrement.”
– Juan Pablo Pérez Alfonzo
Alfonzo was a prominent Venezuelan diplomat, politician and lawyer, primarily responsible for the inception and creation of OPEC.
Davy on Thu, 16th Nov 2017 11:41 am
My god, widdle g, after dozens of stalks and pricks says something. Not much but that is a start.
GregT on Thu, 16th Nov 2017 12:13 pm
“My god”
God does not belong to you, delusionalist.
Sissyfuss on Thu, 16th Nov 2017 1:01 pm
Short, does the EROIE on Venezuelan oil drop precipitously because of its heavy quality and its need to be mixed with lighter varieties? Or it still easy to extract therefore a better return?
Duncan Idaho on Thu, 16th Nov 2017 6:21 pm
“Short, does the EROIE on Venezuelan oil drop precipitously because of its heavy quality and its need to be mixed with lighter varieties?”
It is dependent on US refinery production in Texas and Louisiana. A new heavy oil refinery will be online (Chinese built, as I remember) in 2018.
This will change the dynamic a bit, and put more control in Ven’s hands.
It would be the US’s worst nightmare for Ven to have actual control of the largest oil resources on Earth.
The US probably has about 6 months to torpedo the current government.
It is a race for time. Russia is not going to let Ven default on anything– so the options are closing for Ven to be going back to being a US Client State.
Davy on Thu, 16th Nov 2017 7:12 pm
idaho, I think I will wait to hear what a professional like Rock has to say on the subject. You have an agenda to bend. BTW, you do realize the largest oil resource on the planet you speak about are only marginally affordable if that or didn’t you know that? WTF, is the “Ven” talk anyway? Is that the new millennial for Venezuela?
Davy on Thu, 16th Nov 2017 7:15 pm
OH, BTW, Ven already defaulted. Russia didn’t save them. Russia extended and pretended their national debt which I believe was around 3BIL. That was military hardware debt I believe. They did not get involved with Rosneft debt or any other entity. Maybe you need to brush up on your finance too.
Duncan Idaho on Thu, 16th Nov 2017 8:03 pm
“You have an agenda to bend. BTW, you do realize the largest oil resource on the planet you speak about are only marginally affordable if that or didn’t you know that?”
Ven oil is profitable at about $50, last time I checked.
And I’m 70.
And no, Ven has not defaulted.
Both bond payments were paid in full.
Ven has very little debt by international standards.
“$3.2B
The deal spreads the loan payments out over a decade, with “minimal” payments over the first six years, the Russian Finance Ministry said in a statement. The pact doesn’t cover obligations of state oil company Petroleos de Venezuela SA to its Russian counterpart Rosneft PJSC, however.
“The terms are flexible and very favorable for our country,” Wilmar Castro Soteldo, Venezuela’s economic vice president, told reporters in Moscow after the signing. “We will be able to return to the level of commercial relations with Russia that we had before,” he added, noting that a deal to buy Russian wheat will be signed next week.
Wheat. Oil. NYC will rage. (Particularly the NY Fed)
Then we have this from ye olde ISDA
A finance industry committee convened to discuss whether Venezuela’s state oil company has defaulted on its debts has elected to delay the decision once again, underscoring the uncertainly swirling around the country’s bond payments.
ISDA is made up of bank reps. If anyone among them has big bond holdings, they are NOT going to declare default. S&P can make whatever call they like. They are not the arbiter.
To learn what crap this is, go back and research what ISDA did when Greece could not pay their bond payments. Did they declare default? No. Hell, no. Such a declaration could have become global systemic. So no way in hell they obey their own rules and declare things according to those rules.
It’s all silliness, people. 2008/9 destroyed it all. Pretense holds the system together now.”
Davy on Thu, 16th Nov 2017 8:21 pm
idaho, you are wrong. I just posted the default.
Sissyfuss on Thu, 16th Nov 2017 9:42 pm
Well Forbes said they defaulted 3 days ago, then said they didn’t 2 days ago but Reuters says they did. Seems some economic ratings group has to rule on what is. And Duncan, if China is setting to take Vens crude to their new refinery, what is Rosneft doing with its loan arrangements? I thought they were going to trade wheat for the heavy oil.
Duncan Idaho on Thu, 16th Nov 2017 11:23 pm
“idaho, you are wrong. I just posted the default.”
“Selective default”
“This is just a continuation of bad headlines,” said Ray Zucaro, chief investment officer at RVX Asset Management.
No one is going anywhere davy, you need to be a bit street smart.
“PDVSA also said it made the interest payment on its 2027 bond and “successfully completed” capital payments on the 2020 and 2017N bonds.
Two ratings agencies declared President Nicolas Maduro’s government in “selective default” earlier this week for failing to make overdue coupon payments within a grace period.
BONDHOLDERS STAYING CALM
All 15 members of ISDA’s financial committee voted in favor of statements that “a failure to pay credit event had occurred with respect” to Venezuela and PDVSA.
The ISDA committee members are global financial institutions that include Bank of America, Barclays Bank, Credit Suisse, Deutsche Bank and Goldman Sachs.
Investors said the ISDA decision would not rattle markets, however, given Venezuela’s efforts to pay – albeit late.
“This is just a continuation of bad headlines,” said Ray Zucaro, chief investment officer at RVX Asset Management.
“But as long as the government tries to pay, and bondholders get their late payments, they’re really not incentivized to do anything … It’s a really unusual situation.”
Venezuelan bond prices have been on a roller-coaster over the past two weeks, as Maduro called investors to inconclusive debt restructuring talks, while also pledging to keep honoring the OPEC nation’s obligations.
Venezuelan officials blame payment delays on U.S. sanctions, which have made banks warier of dealing with funds from Caracas, thus clogging transfers.
Venezuela and PDVSA have around $60 billion in outstanding bonds, while private estimates put total foreign debt between $120 billion and $140 billion.
One source at a large holder of Venezuela bonds said investors were holding back from an aggressive course of action against the Maduro government while payments were still coming through.
“Even after the ISDA decision, it’s not the best idea for anyone to accelerate a default if there’s a chance they are going to be able to receive an amortization or interest payment any time soon,” the source said.
“As long as Venezuela and PDVSA pay, most bondholders will likely prefer to deal with the delays.”
Duncan Idaho on Thu, 16th Nov 2017 11:30 pm
“I thought they were going to trade wheat for the heavy oil.”
They are– it just with the new refinery, they will have control of refinery production, rather than US refineries.
You need to separate the two.
“I haven’t seen any number other than $21B for total debt. OTOH there IS a mention out there of debt/GDP of 28% and GDP is 300B. Of course one cannot know what proportion of the 100B would be external. Probably that’s the 21B, in which case this is pretty powerful stuff the Russkies just did.
As for the oil company’s debt, it doesn’t matter who the shareholders are. That’s not Venezuelan debt and is not backed by Venezuela’s govt. Imagining it is would be like declaring Nestle’s debt is backed by Norway’s Sovereign Wealth Fund just because they own shares in Nestle. Or declaring the government of Switzerland backs Apple debt because the Swiss National Bank (their central bank) buys shares of Apple.
Beyond all these details is the big picture. Russia is not going to allow regime change via “financial force” aka banking sanctions. Russia’s alternate financial network is becoming a real thing with real power, because it is based in oil and oil is all that matters.”
-Watcher
Davy on Fri, 17th Nov 2017 1:01 am
“No one is going anywhere davy, you need to be a bit street smart.”
Idaho, they defaulted and now they are talking about a CDS auction. Join reality and quit interjecting your agenda where it does not belong. You said there is no default because Russia won’t allow it. Russia just extended and pretended their military debt IOW creative default management. You said China is coming to the rescue with a heavy oil refinery. You said they have the largest oil resource in the world. I told you much of their oil is uneconomical. You also do not understand the international oil market and China’s new refinery because there is more to it then agenda. You said the US want them as a client state. Who is wanting them as a client state for their own ends? Russia and China are through economic default. The only problem is China and Russia are now throwing lots good money after bad. Russia and China now have a turd. BTW, wait until the next recession China is going to own so many turds the place will be swimming in turds.
BTW, Idaho, where is your link? You are sloppier than md kat with your references. If you are going to have an agenda don’t be sloppy or I will neuter and moderate you.
Davy on Fri, 17th Nov 2017 1:09 am
Are you referencing weight watchers? WTF is –Watcher????
“Probably that’s the 21B, in which case this is pretty powerful stuff the Russkies just did.”
Explain yourself Idaho, WTF are you talking about and who is saying it.
“As for the oil company’s debt, it doesn’t matter who the shareholders are. That’s not Venezuelan debt and is not backed by Venezuela’s govt.”
WTF, “Ven” (your words) is a socialistic “Maduro” state now the oil company is his cash cow or was I should say.
“Beyond all these details is the big picture. Russia is not going to allow regime change via “financial force” aka banking sanctions. Russia’s alternate financial network is becoming a real thing with real power, because it is based in oil and oil is all that matters.”
Show me the goods with the Russia alternative financial network Mr. Idaho. Russia is not huge country. They are already getting overextended in the ME. What do you think they are taking over the world? They just got into bed with a corpse. That was a brilliant move with the world likely moving into a global recession.
GregT on Fri, 17th Nov 2017 1:25 am
“That was a brilliant move with the world likely moving into a global recession.”
The world is already in a global recession, that originated in the US of A. China and Russia are not going to allow that to happen again. They are taking over the world, while the US continues to collapse, financially, socially, and politically.
The Empire has no clothes.
GregT on Fri, 17th Nov 2017 1:28 am
“If you are going to have an agenda don’t be sloppy or I will neuter and moderate you.”
You aren’t neutering, or moderating anybody. You are totally delusional, AND a complete nut-bar.
Davy on Fri, 17th Nov 2017 1:33 am
“posting this to an article thread that does not run off the edge)
Post party “party” hangover? The party was having cake and eating it and now they are trying that in the real world. You can’t have the fruits of the cleansing of a recession and not the pain and that is what China is trying to do. They want to tame the multiple bubbles and curb the excesses. It is not working and every one of you should be concerned because China is the next financial crisis and we will all be a part of it. The new normal of the financial crisis post 08 driven by the FED went into a new normal in 2015 with China. Japan and Europe have done their part too but that was just keeping themselves afloat. China kept the global bubbles going and that is likely ending and in a matter of months the “S” is going THTF. All good things come to an end especially fake reality. This is likely going to be a process of event because the world is so interconnected and managed there is nowhere to panic and run to so panics will pop and be managed (Hopefully). But that management will likely be in decline and decay.
The days of credit growth are nearly over and with it a degree of prosperity for the rich but remember the rich have been the ones generating the trickle down to the gutted “main streets” around the world. Now that is going to be gone too. Just more pain for the majority of the world who now will not even benefit form the crumbs. Think about all those pensions and unfunded liabilities that represent the global safety nets. This is not good but the techno optimist just point to more and more development. What they fail to do is say how it will be paid for especially when a global recession or worse hits.
“Despite Massive Liquidity Injection, Chinese Stocks, Commodities Head For Worst Week Of Year”
http://tinyurl.com/ycq6qo27
“The PBOC stepped up cash injections this week, suggesting authorities are trying to shore up financial markets as a selloff in bonds spreads to equities… but it is not working! As Bloomberg reports, the central bank has already added a net 510 billion yuan ($77 billion) via open-market operations into the financial system this week, matching the third biggest weekly injection this year.”
“The increase in cash additions will help soothe market sentiment,” said Qin Han, chief fixed-income analyst at Guotai Junan Securities Co. “But the decline will not be reversed, as the market’s biggest concern is not tight liquidity but tougher financial regulation.”
Davy on Fri, 17th Nov 2017 1:40 am
“China and Russia are not going to allow that to happen again.”
LMFAO, do you have any links or references how this is going to happen Einstein?
“They are taking over the world, while the US continues to collapse, financially, socially, and politically.”
LOL, more mad kat desperation parading as a stalk and prick. Widdle g, if you are going to make bold talk then back it up with something at least. Dutchy at least has his WordPress shit. You have nothing but your emotional whining. What fun!
“The Empire has no clothes.”
More like China has no cloths they are the new “fake financial” empire. IMA, the nations that need to worry the most about a Chinese market collapse is Canada and Australia who have engaged in the worst of the offshoring of the Chinese housing bubbles. IMA, something you engaged in widdle g. Canada and Australia have a big headwind in front of them and you are whining about the US.
Davy on Fri, 17th Nov 2017 1:41 am
“You aren’t neutering, or moderating anybody. You are totally delusional, AND a complete nut-bar.”
I make you and mad kat look like a fool daily widdle g, you just can’t see it because you know you are so proud.
GregT on Fri, 17th Nov 2017 1:55 am
. “I make you and mad kat look like a fool daily widdle g, you just can’t see it because you know you are so proud.”
It’s rather difficult to see something, that only exists in your active little imagination, delusionalist.
Davy on Fri, 17th Nov 2017 1:58 am
say something widdle g, who cares about your anti-American stalking and pricking obsession. Each time you whine and gnash your teeth is enjoyment for me. A word of advice widdle g, saying something with links sticks but your stupid tantrums don’t.
GregT on Fri, 17th Nov 2017 2:11 am
” A word of advice widdle g, saying something with links sticks but your stupid tantrums don’t.”
I’ve already posted plenty of links over the last few years, from several different psychiatric associations delusionalist, you’ve ignored all of them. Nobody can help you, until you make the effort to help yourself.
Your anger management issues are obvious, as are all of your others. As transparent as glass. You are very well aware of what I am talking about.
Davy on Fri, 17th Nov 2017 2:15 am
Widdle say something. Who cares about your armature psychological opinions which I see are reflecting upon yourself. You are projecting subconsciously widdle. You are suffering from being retired and completely bored after pocketing that cool $miliion$ from you lottery win and the Hongcouver casino. Are you getting cabin fever up there in those BC hills?
makati1 on Fri, 17th Nov 2017 2:16 am
GregT, Davy is destroying himself. I hope his family, IF he has one, is not dependent on his living for much longer. Strokes and heart attacks come early for people like him who cannot manage their emotions or stress. Or a mental institution.
Duncan Idaho on Fri, 17th Nov 2017 9:36 am
Venezuela Did Not Default, But Risks Remain
Forbes-Nov 15, 2017
Investmen firms trade bonds flat typically if bonds are in default, and trade bonds based on interest payments due if bonds are believed to be paid at some point. In other words, the market thinks Venezuela will service its debts, though risks remain. At this point, bond holders have not agreed to call the …
https://www.forbes.com/forbes/welcome/?toURL=https://www.forbes.com/sites/kenrapoza/2017/11/15/venezuela-did-not-default-but-risks-remain/&refURL=https://www.google.com/&referrer=https://www.google.com/
GregT on Fri, 17th Nov 2017 9:41 am
“Who cares about your armature psychological opinions”
Obviously you do, and it doesn’t take a professional to figure out the blatantly obvious.
“You are projecting subconsciously widdle.”
I am doing very well, thank you very much.
“You are suffering from being retired and completely bored after pocketing that cool $miliion$ from you lottery win and the Hongcouver casino.”
Surprisingly, I find myself to be busier now, than I was when I was still employed. There isn’t enough time in the day.
Although I could have done much better if I’d waited a few years longer, I pocketed a tad more than “a cool $million$” when I opted out of the Hongcouver housing market casino. Best move I’ve ever made. Should have done it a long time ago.
“Are you getting cabin fever up there in those BC hills?”
Those would be 8000 ft mountains delusionalist, and that imaginary cabin, is in reality a house. Just because you live in a tiny little cabin, does not mean that everyone else does.
Davy on Fri, 17th Nov 2017 9:43 am
Duncan, that was two days ago besides nobody knows what is going on this is one big international mess.
Davy on Fri, 17th Nov 2017 9:46 am
I am so happy for you widdle. Now say something and quit your bragging.
IMA a person like you would never be honest about his personal life anyway. You are an extremist stalker and pricker suffering anger issues.
I was also wondering if maybe you are an alcoholic?
GregT on Fri, 17th Nov 2017 10:01 am
“I am so happy for you widdle.”
Thanks delusionalist, your opinion means the world to me. 🙂
“IMA a person like you would never be honest about his personal life anyway. You are an extremist stalker and pricker suffering anger issues.”
More delusional accusations.
“I was also wondering if maybe you are an alcoholic?”
That would all depend on ones perspective. According to AA, a person can be considered an alcoholic, if they have one drink a week. I do enjoy a dark ale from time to time, and I like dark Cuban Rum. So ‘maybe’……..
Duncan Idaho on Fri, 17th Nov 2017 8:02 pm
“Duncan, that was two days ago besides nobody knows what is going on this is one big international mess.”
Sorry Davy, Ven is not going down because it can’t pay its debts.
I would not hold your breath.
There are other reasons, but debt is not one of them.
Davy on Fri, 17th Nov 2017 8:13 pm
Going down and defaulting on debt is two different things, Idaho. I think that is pretty elementary, Idaho. Idaho, are you peddling an agenda like the other extremist here?
Duncan Idaho on Fri, 17th Nov 2017 8:18 pm
Davy–
Just helping you on your political and economic literacy.
You are the poster child for the Dunning–Kruger effect.
In the field of psychology, the Dunning–Kruger effect is a cognitive bias wherein people of low ability suffer from illusory superiority, mistakenly assessing their cognitive ability as greater than it is. The cognitive bias of illusory superiority derives from the metacognitive inability of low-ability persons to recognize their own ineptitude.
Davy on Fri, 17th Nov 2017 8:28 pm
Another amateur psychologist.lol. Idaho, you are a dumbass that is new to the board and you are getting an education. I can see why you are whining. Why don’t you stop the sloppy posting and stop peddling an agenda. This is an Internet forum not Dr. Phil. If you want to contribute show some intelligence.