Some Facts About The Cards Up Venezuela's Sleeve

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Summary

Pros and cons of the OPEC deal for Venezuela.

The U.S. share in Venezuela's oil exports remains the same, while India's share slides.

China and Russia are ready to invest in the country's oil sector.

Internal and external turmoil continues to hit the country.

November, much anticipated by all the players in the global oil market, is now over. A lot has changed, but there are things that remain stable, no matter what's going on. This cannot be said of Venezuela. Once the most prosperous economy in Latin America, now Venezuela strives to survive, with its population is becoming poorer. The country's instability has pushed authorities to take numerous measures to stay afloat. For instance, there's the OPEC deal. President Nicolas Maduro had been advocating for the deal. He had really great expectations regarding it. This is a case when politics and economics intertwine so intensely that no one can tell where one ends and the other begins.

On the one hand, advocating for the OPEC deal was the right move, resulting in the healing of oil prices, even Venezuelan oil prices, which are lower compared to the world benchmark. On the other hand, the outcome of the OPEC deal among OPEC members might be not that great for Venezuela, as it tears at the fabric of the country's oil-dependent economy. Continuing to pump and sell is always better than things that hinder production when an economic crisis shakes your country.

We don't know the precise volume of oil produced by Venezuela in November, as we all are waiting for the OPEC Monthly Oil Market report. But we can and should analyze Venezuela oil exports in November.

Venezuela oil exports in November Source: Tanker tracking data, author's calculations.

As we can see in the above line chart, a seven-day trend reflects the cumulative trend of the monthly oil outflow. There were some minor rises and falls in November, but overall the curve can be called more or less straight. That means Venezuela's storming oil sector provides its importers with energy resources. Let's check out a chart that details Venezuela's oil export countries.

Venezuela oil exports by destination country Source: Tanker tracking data, author's calculations.

Despite all the tensions with the U.S., Venezuela's exporting of crude oil to this country remains pretty much the same -- 33% compared to 32% in the previous month. The history of relations between the two countries has been very intense and hit bottom during Barack Obama's presidency, when the economic sanctions were imposed. Despite the fact that the restrictions were prolonged in July, the interdependence of both states in the oil sector has not vanished. This can be seen in the pie chart above. It's worth noting that the government of Venezuela hopes for the improvement of relations with the U.S. under Trump. Still, it's difficult to predict whether the President-elect will be a solution to all of Venezuela's problems, including its enormous debts.

China's import of Venezuelan oil grew to 5% vs. the October data. This might be due to a readiness of Chinese investors to pump money into Venezuela's soaring oil sector. According to Bloomberg, China is looking for the opportunity to receive access to the country's enormous resources. We think it will happen given that Venezuela really needs that money in exchange for the access. But China is not the only country in the world that is ready to benefit from Venezuela's continuous oil production. Russia is also ready to bid for the country's reserves. This doesn't come as surprise given that the Orinoco Belt has the largest estimated oil reserves in the world. Recently, it was reported that Russia has shown an interest in investing in the Orinoco Mining Arc. Actual interest of Russia and China in Venezuela's oil sector shows that the country has some cards up its sleeve, although we lack confidence in the overall situation.

What concerns us the most in the recent situation is that India's importing of Venezuelan oil has fallen 4% since October. As you can see from our article about India's oil imports, the share of Iran and Iraq grows constantly, while Venezuela's falls. It's not yet a trend, but the situation can worsen for Venezuela in the near future due to the fact that Saudi Arabia has a stake in India being the savior of its oil sector. Actually, everything will depend on which country provides India with better conditions for oil imports.

More negative news about Venezuela came up recently, on Dec. 1, when the country was suspended from MERCOSUR (the South American Trade bloc). This means there will be an additional burden on the Venezuelan economy. Moreover, the internal political crisis never ends in the country. The socialist government has not been able to fulfill the opposition's demands in the latest round of negotiations. It seems as if Venezuela's bittersweet November will be followed by a bitter (for now, at least) December. Though PDVSA's terminals are working and tankers are carrying cargoes to the different destinations, it is not enough for the Bolivarian country to increase its share in the global oil market.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: The material presented in this article is provided for informational purposes only and is based upon information that is considered to be reliable.