Venezuela’s Asia Tour Backfires as Crude Extends Slump

Venezuelan President Nicolas Maduro is winding down a tour of Asia and Russia that was intended to garner support for measures to bolster oil prices. A further 8 percent decline since the trip started suggests he failed.

Maduro plans to coordinate with OPEC and non-OPEC producers to create a “formula that impacts the oil market and restores the normalization of prices,” he said Thursday after meeting with Russian counterpart Vladimir Putin as the lowest prices in six years threaten both nations’ economies. Crude extended declines after Maduro spoke.

Venezuelan government lobbying to prop up prices is falling on deaf ears among other OPEC members that are prepared to let prices fall to a level that undermines a U.S. shale boom. Saudi Arabia, the United Arab Emirates and Kuwait have said repeatedly over the past six weeks that the organization wouldn’t cut output to halt the biggest rout since 2008.

“It was a surprise that he went on tour with such short notice, but the results have been unsurprising,” Russell Dallen, Miami-based managing partner at Caracas Capital Markets, said in a telephone interview.

Since making his first public statements during the trip on Jan. 6, crude prices have declined about $4 a barrel.

“I don’t see much movement in OPEC policy unless Saudi Arabia decides to make a change and they have signaled they are not doing that,” Andy Lipow, president of Houston-based energy consultant Lipow Oil Associates LLC, said by telephone.

Russia Meetings

Venezuela, which holds the world’s largest crude reserves, relies on oil exports for almost 95 percent of foreign currency earnings. The price of the country’s crude fell to $42.44 a barrel last week from a peak of $100.64 on June 27.

The largest decline in prices since 2008 has raised concerns that Venezuela could default as foreign currency reserves decline and the economy contracts.

Maduro said he met with Putin in Moscow to discuss global oil markets and the “stability of natural resources.”

“Venezuela is not just a friend but also a close partner, one of Russia’s most important partners,” Putin said in a statement posted online by Venezuela’s Information Ministry.

Russian companies have agreed to increase their investments and participation in joint venture companies with PDVSA in the Orinoco heavy oil belt, Maduro said from Moscow, without providing details.

‘Big Numbers’

While in China last week, Maduro said Venezuela obtained $20 billion in Chinese investment for economic, energy and social projects. He didn’t give details. Earlier this week, he said Qatar would lend Venezuela “various billions.”

“Big numbers with no details just leaves everyone suspicious of whether they actually secured disposable funds,” said Siobhan Morden, the head of Latin American fixed-income strategy at Jefferies Group LLC in an e-mailed response to questions. “It doesn’t appear as a successful trip.”

State-owned Petroleos de Venezuela plans to invest $302 billion through 2019 to boost output to 6 million barrels a day from about 2.9 million in 2013, according to its annual report.

Moody’s lowered the long-term rating and senior unsecured notes of Caracas-based PDVSA to Caa3 from Caa1 on Jan. 15. Moody’s also cut the corporate family rating to B3 from B1 for PDVSA’s primary U.S. holding, Houston-based Citgo Petroleum Corp.

Venezuela’s benchmark bonds due 2027 fell 0.7 cent on the dollar to 36.350 cents at 2:41 p.m. in New York.

“Qatar produces half of what we do, and we’re asking them for a loan?” opposition leader Henrique Capriles said Jan. 14, accusing authorities of squandering the “biggest oil bonanza‘‘ in the country’s history in the past 12 years.

Download: New Year's Wishes for Venezuela: View (Audio)

Before it's here, it's on the Bloomberg Terminal. LEARN MORE