Last November, the price of a barrel of Venezuelan Merey crude oil was not content with being the only one to have risen within the list of the 12 crudes that make up the basket of the Organization of Petroleum Exporting Countries (OPEC), but its rise was the only one that occurred among the crudes that mark the world oil market.
In the table of the Monthly Oil Market Report published by OPEC, it appears that the Merey jumped from its lowest price in the year set in September, 54,91 dollars, to 58,30 dollars in October and continued up to 59,58 in November, while the OPEC basket fell in this last month 1,47 dollars, 2%.
The other seven crude oils on the world market, from countries outside the Organization: WTI, Minas, Urals, Istmo, Dubai, LLS, Mars, fell between 1,7 and 2,8 dollars.
The document does not explain why Merey was the only type to have increased in price, but it does offer some variables and clues that give value to Venezuelan crude, traditionally the least valued of the list of 12 types of oil that make up the OPEC basket.
Merey crude is the benchmark oil for the price of a barrel of Venezuelan oil. “The benchmark oil is a kind of blend that represents the characteristics, the quality, of the oil produced by a country. It is like a consumer price index for the different types of oil,” explains Nelson Martínez, in the essay Economía Crudo Merey 16, via blend.
In the foreign market, mainly in the US economic orbit, the marker crude is West Texas Intermediate (WTI), while in Europe it is Brent, from the North Sea. Between 1990 and 2003 the Venezuelan marker crude was the Tía Juana light type at 32 degrees API. From 2004 to 2008 the Bolívar Coast Field was 17 API and since 2009 it is the Merey 16 API.
Martinez points out that oil improvers are used to reduce viscosity and facilitate the transfer of heavy oil from the Orinoco Oil Belt via pipelines, as well as to reduce water, sediment, carbon and sulfur content. The result is an improved Merey oil with 16 API degrees and 2,71% sulfur. WTI has 36 API degrees and 0,47% sulfur.
PDVSA has four upgraders located in Puerto La Cruz, but its high technological dependence makes it easier for US sanctions against Venezuela to prevent the purchase of equipment and spare parts essential for its operations.
The company therefore resorts to mixing heavy and extra-heavy oil from the Belt with higher API grades, less viscous oils, called diluents, which allows them to raise their API grades and thus facilitate their transfer via pipelines.
Diluent oils are extracted from the Santa Bárbara, Anaco, and Mesa fields in the state of Anzoátegui. Alternatively, they are imported under the name of naphtha or light crude oil. When Merey-type oil is sold with diluent included, the less expensive the diluent used, the more profitable the mixture will be.
However, the quality of the oil is key and is determined mainly by the API grade and the presence of water, solids and sulfur. When it has a lower API grade and a higher sulfur content, it is called sour, which requires more complex refineries that are different from those that refine light and medium oils.
Many of these refineries are on the US Gulf Coast. The OPEC report says that the USGC is an indicator that measures the value of petroleum products in the Gulf Coast according to the quality necessary to meet market specifications, and takes into account the average of the last ten quotations of the products.
OPEC reports that USGC's value fell in November as sour crude gained support from higher fuel oil margins, while light and sweet crude faced pressure due to high availability and lower profit margins for naphtha and gasoline.
Venezuela supplies 20% of the refineries in the Gulf of Mexico. In November, it exported 238.000 barrels per day (bpd) to that country, while 613.000 barrels went to Asia out of a total export of 974.000 bpd.
Available data for November show that US crude imports rebounded in November from the October decline to average 6,7 mb/d as refineries returned from maintenance.
In Asia, combined refinery output in Japan, China, India, Singapore and South Korea rose 260.000 barrels per day month-on-month in November to average 25,93 million barrels per day, OPEC said in preliminary data.
Overall, OPEC notes that strong economic growth trends have continued towards the end of the year, leading to slight increases, with forecasts unchanged at 3,1% for 2024 and 3% for 2025.
China's economy is showing positive data after its government announced stimulus packages last September, which aim to further diversify trade with regions such as Latin America, Russia and the Middle East to mitigate trade disruptions from the United States.
US economic growth remained solid in the fourth quarter of 2024, continuing the momentum shown since the beginning of the year. GDP growth was 2,8% quarter-on-quarter, slightly below the 3% growth seen in the second quarter. Consumer confidence rose solidly to 111,7 in November from 109,6 in October.
However, headline inflation in the US continued to rise in October, coming in at 2,6% compared to 2,4% in September and 2,5% in August. Housing costs, a key contributor to inflation, rose to 4,9% year-over-year. This increase was consistent with the rise in September, when it fell below 5% for the first time since February 2022.
“This was a significant development related to housing. Price increases have accounted for up to three-quarters of total headline inflation in recent months, keeping core inflation elevated,” the report said.
The number of homeless people in the United States has risen to 771.480, the highest level in recorded history, the U.S. Department of Housing and Urban Development reported. The number of homeless people in families with children rose 39 percent to 259.473 this year.
According to the publication, the increase in the number of homeless people is due to factors such as a lack of affordable housing, inflation and stagnant wage growth. In addition, the health crisis and natural disasters have also had a negative impact on the situation.
One factor affecting inflation is the price of petroleum derivatives. The US has raised and even exports light and medium-sized petroleum, but remains tied to imports of heavy sour petroleum such as Merey.
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So Trump will have no choice but to continue buying oil from Venezuela if he does not want to ruin his economy with more inflation.