Outlook 2019: Venezuela’s oil minister, a general with no industry experience, is now OPEC’s president
OPEC enters a pivotal third year of production cuts in a volatile oil market with its least experienced minister at the helm.
Venezuela’s Manuel Quevedo, a former brigadier general in the country’s National Guard, will take over the group’s rotating presidency in 2019. The timing of his ascendency could not be worse.
Brent crude has plummeted 40% since reaching $86/b in October, despite OPEC and its allies agreeing in December to 1.2 million b/d of cuts. As concerns grow over the strength of global demand, Quevedo will be responsible for keeping the peace within OPEC and ensuring its members keep their promises.
His task is complicated by Venezuela’s own collapse as a major force in the oil industry. The crisis-wracked country — with its crumbling oil production, runaway inflation and crushing debt — is in a weak position at the head of OPEC’s top table. Quevedo, a fervent Marxist, may struggle to be heard as the group’s main ministerial mouthpiece.
OPEC watchers say the rhetoric coming from Venezuela — often anti-US and out of touch with the real challenges facing the country — may present a challenge for the organization, as it tries to keep US President Donald Trump at bay and maintain vital ties with Russia to shore up oil prices.
“Today Venezuela needs some soft-spoken person to improve their image rather than an aggressive approach,” said Kamil al-Harami, an independent oil analyst based in Kuwait.
Quevedo, who also heads state energy company PDVSA, is loyal to President Nicolas Maduro, who appointed him in late 2017. The government in Caracas has emerged as a geopolitical focus for the Trump administration alongside Iran, which has also been targeted with sanctions.
Despite concerns, Quevedo insists his main focus as OPEC president will be to maintain the bloc’s tenuous solidarity.
“We are looking to maintain the unity between OPEC and non-OPEC countries, to continue with the cooperation we already have and to have sustainable prices for crude oil,” Quevedo said in an interview with S&P Global Platts on the sidelines of this month’s fraught meeting in Vienna. “This cooperation has been successful.”
Venezuela is exempt from OPEC’s latest cuts. Instead it plans to raise slumping oil production by 1 million b/d with the help of Russian and Chinese financing. However, analysts are dubious of the plans given the endemic corruption in the country, the sorry state of its oil infrastructure, and brain drain of top technical experts in PDVSA, who have either been purged or fled the country.
Venezuela pumped 1.17 million b/d in November, according to the latest Platts OPEC production survey, down 630,000 b/d year-on-year and 900,000 b/d in two years.
“The degree to which Venezuela can be a force for consensus and collaboration, I have questions about that,” said Helima Croft, global head of commodity strategy for RBC Capital Markets. “They’re talking about raising production while OPEC is talking about cutting production. There are a lot of credibility issues with what Venezuela is saying.”
Quevedo said there is no inconsistency in Venezuela’s position. The 1 million b/d increase Venezuela is aiming for would merely restore lost production he blamed on “logistical problems.” This is why the country secured an exemption from the OPEC/non-OPEC cuts, he added.
“There is no contradiction. We follow the collective interest and the collective decisions of OPEC,” the minister said. “Our proposal is just to recover our potential capacity we have installed.”
Given the uncertain market outlook, OPEC has moved up its next meeting to April, one to two months earlier than it usually meets in Vienna. As president of OPEC, Quevedo will chair the meeting and will also be responsible for calling any emergency sessions.
Venezuela has often railed against US sanctions imposed on PDVSA over the country’s human rights violations, and as such, is often aligned in OPEC policy positions with Iran. Quevedo has called the US sanctions “a direct attack against the stability of the oil market.”
Such rhetoric could invite more attacks by Trump on OPEC and widen divisions within the group between geopolitical rivals Iran and Saudi Arabia, OPEC’s largest producer. The timing of Quevedo’s presidency also follows Qatar’s shock move to resign its membership and moves by US lawmakers to push forward with the so-called NOPEC antitrust bill.
A more fractious OPEC may also turn off Russia, the world’s largest oil producer and the 15-member group’s biggest ally. On handing over his seat, UAE energy minister Suhail al-Mazrouei — OPEC’s president for 2018 — said Quevedo is well-aware of the challenges facing the organization next year. But the timing of the change is still risky.
“The minister, first of all, is a very good gentleman, and he has been watching and taking notes and consulting with us,” Mazrouei told Platts. “We left him with a good deal that has a six-month span. We will continue to support him.”