Move Matches Earlier Cut by Mexico : Venezuela Reduces Price of Heavy Crude Oil

Venezuela, a leading oil supplier to the United States, lowered the price of its heavy crude oil by 40 cents a barrel Tuesday, following a similar move by Mexico last week.

The move will affect exports of about 538,000 barrels daily.

Products refined from heavy crude are generally for industrial use. Lighter oils are more easily converted into products such as gasoline.

At the same time, prices of exported diesel oil, heating oil and jet fuel will be increased by $1.26 per barrel, or about 3 cents per gallon, effective immediately. Exports of those products are estimated at 200,000 barrels daily, the Ministry of Energy and Mines said.

The Venezuelan move matches Mexico’s decision last Wednesday to lower the price of its Maya heavy crude by 40 cents per barrel, to $23.10 from $23.50. Venezuela’s competing Bachaquero 17 will now be sold at the same price.

Along with the last week’s drop in heavy crudes, Mexico also increased by 60 cents a barrel the price of its light Isthmus crude, to $27.50 from $26.90.

In 1984, Venezuela supplied about 10% of U.S. oil imports, or 536,000 barrels daily. Mexico, the largest foreign supplier, sold about 739,000 barrels per day to the United States last year.

“The Venezuelan action was fully expected,” said Eugene Nowak, an oil analyst and senior vice president at Dean Witter Reynolds in New York.

He noted that, in recent months, there has been upward pressure on prices of such light refined products as gasoline, jet fuel and kerosene, while prices of heavier products have been weak.

With Venezuela following trends already established in petroleum markets, and with gasoline prices holding up, no significant impact on consumers was expected.

Venezuela, a member of the Organization of Petroleum Exporting Countries, is bound by the cartel’s price guidelines on light and medium crudes but can adjust heavy crude prices under a special a special agreement with the other members.

On Aug. 1, the government cut heavy crude prices by an average of $1.95 per barrel--again, following price cuts totaling $2.25 by Mexico in June and July. Mexico is not a member of OPEC.

In July, before the heavy crude price cuts, Venezuelan oil exports had fallen to less than 1 million barrels per day, down from an average 1.272 million barrels per day during the first six months of the year.

Heavy crudes make up about half of Venezuelan oil exports. Venezuela relies on petroleum exports for more than 90% of its export earnings.

The nation’s external debt of $31 billion is exceeded only by those of Brazil, Mexico and Argentina.

In September and October, the state oil company Petroleos de Venezuela announced increases in the price of gasoline and several other refined products, citing a stronger world market.

Nowak said another reason the latest action was expected was that Venezuela and Mexico, Latin America’s largest oil producers, have a stated policy of “coordinating” prices and production. In recent months, however, that has amounted to Venezuela matching Mexico’s pricing moves.

Mexico currently produces about 2.7 million barrels of oil per day and exports 1.4 million. Venezuela has an OPEC production quota of 1.55 million barrels per day. The country’s revised export goal for 1985 is 1.356 million barrels per day, down from the original figure of 1.410 million.