Venezuela has lots of oil, but it is heavy and sulphurous, which means it is costly to refine and is not terribly viable uniess oil prices remain high for a sustained period (refinery capacity is now skewed towards the sweet, light grades). That’s why Venezula, along with Iran, is the most aggressive among OPEC members in advocating production cuts.
The market appeared to be providing the South American oil producer with exactly what it wanted, until oil prices started faling back in July. So Chavez has a remedy. As reader Michael noted:
I’m sure china had only their interests in mind when they were hoarding diesel prior to the Olympics…however, that sent a powerful message to Chavez and Putin…manipulation of futures markets requires a certain ability to control supply (hoarding). So this “oil bank” is no doubt, a last gasp effort by Venezuela, which requires ~$90 oil to sustain their economy, to keep prices high.
Venezuela’s President Hugo Chavez on Tuesday called for oil producing countries to create an oil bank and warned oil prices could fall further.
“We once proposed the creation of an OPEC Bank…but it wasn’t adopted. Lets work with the idea of an oil bank, a couple of oil (producing) countries can do it,” Chavez said as he arrived in Brazil for a state visit.
The president gave no details of how this bank would work but insisted it was a needed idea.
Chavez also acknowledged falling oil prices and said he believed they would stabilize soon.
“We expect (the price) to stabilize between $80, $90 and $95 a barrel,” he said.
His administration has lately defended the idea of a price for West Texas intermediate crude at $100 a barrel, a price level the Andean country promoted during the September meeting of the Organization of Petroleum Exporting Countries in Vienna.