Oil Prices Fall as Venezuela’s Strike Cracks

However, the threat of a US led war on Iraq keeps crude above $30 a barrel

After the last Sunday announcements of retreat made by Venezuela’s tough opposition, the oil price started ceding. Venezuelan exports experimented a recovering during the last weeks as a result of Government’s partial victory over rebel PDVSA officials.

Venezuelan President Hugo Chavez said on Sunday crude oil output had risen to nearly 1.8 million barrels per day (bpd), up from a low of 150,000 bpd after the strike began in December and more than half of the 3.1 million bpd pumped in November. However, strikers insist production stood at just over one million but acknowledge it was rising.

Anyway, figures show country’s best performance over the last three months and a clear way to normalization in the near future. This may calm oil London market. However, it keeps on being reluctant to push down prices as US will to attack Iraq remains alive.

According to ABC News, data from shipping agents showed Venezuela's oil exports rose to 890,000 bpd in the week to February 1 from 550,000 bpd a week earlier, but were still only one-third of normal levels of 2.7 million bpd before the strike. In turn, OPEC ministers warned at the weekend that oil markets could tip into oversupply in the second quarter and trigger a price collapse.

"If Venezuela comes back (to full capacity), we could have four million bpd or more floating," said OPEC President and Qatari Oil Minister Abdullah al-Attiyah. Non-OPEC supplies also looked robust, with output from Russia, the world's second largest exporter, hitting a post-Soviet high, reports ABC.

But even if supplies have grown, analysts predict oil prices will not fall far until uncertainty is resolved over Iraq, which sells roughly two million bpd of crude to the world market.

The worse on the Venezuela’s crisis has passed. Now, the Government and the opposition will have to look at a political alternative to solve a situation that has led to a deep division among the population. The eyes of the analysts look at the binding referendum on Chavez’s presidency scheduled for August.

The opposition look for signatures to call on the referendum. In turn, the Government will have to struggle hard to rebuilds country’s economy after nine weeks of strike.

Hernan Etchaleco PRAVDA.Ru Argentina