Ecuador, Colombia, Venezuela selling crude below cost of production

Posted on January 21, 2016 • Filed under: Colombia, Economy, Ecuador, Oil, Venezuela reported a more acute crude price slump this month has put several South American countries in the difficult position of selling oil for less than what it costs to produce, according to traders and sources at three companies in Colombia and Venezuela.

So far, the most affected crudes are blends formulated with naphtha and other imported diluents. But if the price rout that shows few signs of ending soon persists, other grades could be hit too, the sources added, potentially putting more pressure on public finances in the oil-dependent countries.

Some of the most known South American blends, which normally trade at significant discounts to benchmark Brent that has tumbled to under $30 per barrel, are fast becoming a type of ‘negative oil’ in a global glut.

Red numbers have also affected Canadian grades and U.S. shale crude, a change that increases the pressure on producers to consider shutting wells rather than running at a loss.

Among the varieties already affected in South America are Venezuela’s Diluted Crude Oil (DCO), which is now selling around $15 a barrel and Colombia’s best seller Vasconia, offered at below $21 in spot deals LCO-VAS, sources from producing firms said.

South America’s fourth largest oil producer, Ecuador, is also under breakeven point, President Rafael Correa said, which is forcing the country into fiscal cuts.

“We have a crude price that is not even covering production costs, which are $24 per barrel,” Correa told journalist on Wednesday. Read Article


Share This Story
  • Print
  • Digg
  • StumbleUpon
  • Facebook
  • Yahoo! Buzz
  • Twitter
  • Google Bookmarks
  • Add to favorites
  • email