For five consecutive months OPEC produced over its alleged quota. Nonetheless, and in spite of falling prices and pleas from Venezuela to restrict production, OPEC decided to take no action.
In the wake of the news, West Texas Intermediate plunged nearly 7% and Brent fell over 8%.
WTI Crude Futures
Brent Crude Futures
Please consider OPEC Fails to Take Action to Ease Glut as Crude Plunges.
OPEC took no action to ease a global oil-supply glut, resisting calls from Venezuela that the group needs to stem the rout in prices. Futures slumped the most in more than three years.
The group maintained its collective production ceiling of 30 million barrels a day, Ali Al-Naimi, Saudi Arabia's oil minister, said yesterday after the 12 nations met in Vienna. Brent crude dropped as much as 8.4 percent in London, extending this year's decline to 34 percent.
Canada's producers big and small will have to tighten their belts to prepare for declining profits.
"This is a pretty big shock," said Justin Bouchard, an analyst at Desjardins Securities Inc. in Calgary. "There's no question there's going to be a slowdown. Even the big guys will have to look at their capital spending plans."
Western Canada Select, the Canadian benchmark, has lost more than a third of its value since June, in step with declines for West Texas Intermediate and the international gauge Brent. WCS traded yesterday at $55.94 a barrel, the lowest in the world.
Venezuela Burns Through Currency Reserves
Bloomberg reports Venezuela Burns Through Third of New Chinese Money in a Week
Venezuela's international reserves declined $1.3 billion in the week after President Nicolas Maduro transferred $4 billion of Chinese loans to the central bank.
The country's reserves dropped to $22.2 billion today, according to central bank data. A collapse in global oil prices pushed Venezuela's foreign currency holdings to an 11-year low earlier this month.
Maduro on Nov. 18 ordered the Chinese loan proceeds to be moved from an off-budget fund, so that they would show up in reserves and help boost investor confidence in an economy beset by the world's highest inflation and widest budget deficit. The following day, Venezuelan bonds rose the most in six years in intraday trading.
"If the plan was to calm the bondholders, then burning through a third of that money in five working days doesn't do it in any way," Henkel Garcia, director of Caracas-based consultancy Econometrica, said in a telephone interview.
Hyperinflation in Venezuela
Foreign reserves are the only reason why Venezuela's currency (the Bolívar) is not completely worthless. Nonetheless, inflation already exceeds 60% annually.
In September, Venezuela's Bolívar Hit Record Low on Black Market.
The plummeting Venezuelan currency breached a new, symbolic low of 100 bolívares per dollar on the black market Friday, according to market-tracking websites, in a sign of the worsening greenback shortage faced by President Nicolás Maduro's government.
Economists say the bolívar is collapsing as Venezuelans clamor for dollars to protect themselves from an inflation rate topping 60%. But the government, which tightly restricts access to dollars, has cut the supply this year, prompting the value of the bolívar to plunge in unofficial street transactions.
The lack of dollars—evidenced by mounting debts with private companies such as airlines and importers that service the country—has sparked fears of a potential default, since the country has more than $6 billion in bond payments due over the next three months.
I suspect it will not be long before Venezuela is forced to halt bond payments. Should that happen, the Bolívar would likely collapse to zero in short order.Facebook, Google Plus, & Twitter. You can also get Freedom Outpost delivered to your Amazon Kindle device here.