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Analysts: "Venezuela needs that price of oil exceeds USD 90 to pay expenses"

Both the Deutsche Bank and consulting firm PFC believe that Venezuelan public accounts are highly vulnerable

According to consulting firm PFC, in 2000 Venezuelan authorities were able to balance the budget with a price of USD 34 per barrel (Photo: AFP)

Amid the fall of crude oil prices, some specialized firms have begun to estimate the impact of the economic crisis on the finances of petroleum exporting countries.

According to studies prepared by PFC Consulting Limited, a Washington-based wholly owned subsidiary of Power Finance Corporation Limited, and German bank Deutsche Bank, Venezuela is the most vulnerable country to the financial crisis.

PFC considers that Venezuela needs that the price of oil averages USD 97 to balance its accounts while in 2000, the South American country required that the price of the barrel of petroleum was USD 34.

The results of the study, released by Reuters, show that Nigeria can balance its budget with a price of USD 71 a barrel; Iran (USD 58); Saudi Arabia (USD 62); Kuwait (USD 48); United Arab Emirates (USD 51) and Algeria (USD 35).

Deutsche Bank says that next year Venezuela and Iran require that the average price of oil remains at USD 95; Saudi Arabia at USD 55 and Russia at USD 70.

The Ministry of Energy and Petroleum only releases the weekly price of the Venezuelan basket of crudes, and based on the statistics, oil prices dropped 35.3 percent, from USD 126.46 on July 18 to USD 81.78 at the end of last Friday session.

"We believe the deepening banking sector crisis and the significant slowdown in global growth that lies ahead will continue to put downward pressure on commodity prices," said Deutsche Bank in a report released on Friday. 

Goldman Sachs said on Monday in a note to clients: "A combination of fear, de-stocking and disruptions across the supply chain owing to frozen credit markets is currently depressing oil demand far below where underlying economic fundamentals would suggest." 

Goldman expects crude to average USD 75 in the fourth quarter and USD 70 at the end of the year, but added: "Should the financial and economic crisis cut deeper into demand, the market could fall as low as USD 50 a barrel."

Deutsche Bank estimates that a price of oil at USD 60 could be considered "cheap."

"We find oil prices would need to fall to USD 35 a barrel in order to bring prices in real terms back to their long run historical averages. However, we believe that important changes in the market especially the geographic location of marginal demand and supply suggest that USD 60 a barrel represents a more realistic characterization of 'cheap' oil," said the report issued by the German bank.

Thanks to the growing optimism among investors after the measures aimed to address the crisis and restore confidence in markets, as well as speculations about OPEC production, the oil regained part of the lost ground.

In the New York Mercantile Exchange (Nymex), the West Texas Intermediate barrel, which is the reference price for the Venezuelan oil basket, traded at USD 81.19, up USD 3.49 in relation to the price at the end of Friday session.

"It appears the utter lack of confidence exhibited on Friday is being replaced with a modicum of confidence," said John Kilduff, analyst at MF Global, as reported by AFP.

The Organization of Petroleum Exporting Countries will hold a meeting in Vienna on November 18 and members of the OPEC such as Iran have urged to reduce oil production to defend prices.

Translated by Gerardo Cárdenas

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