What Jumps Out: The Week of Oil

As we already knew this was going to be light week in terms of data, but that doesn’t mean that Colombian news wasn’t keeping the markets honest. Not for the first time, the oil sector dominated the headlines for a variety of reasons…and most of it was good news.

Firstly, the road blockages in Puerto Gaitan were lifted (see my LinkedIn post on Wednesday for more detail) and this meant to end the reported shortfall of 50,000 bpd – there will be talks in a couple of weeks but hopefully resolution can be found.

Secondly oil production for December was up 5.34% YoY and stood at 784k bpd, as per November the highest reading since Covid struck. This is clearly good news and hopefully it will be reflected in export data going forward; the last couple of months have been a disappointment.

Sticking with oil, the local trade association (ACP) published their 2023 outlook. Following on from a 2022 average production of 754k bpd (+2% YoY) the expectation is for another similar sized increase to 770k bpd. Again, this is positive news, but there is still a mountain to climb to get back to the 1million bpd last seen in 2015. One negative aspect was that ACP is anticipating 4% less exploration investment (US$1.24bn) in 2023 with increasing interest in natural gas.

The oil sector also crept into Central Bank Chairman Villar’s speech at the Treasury Congress. Whilst much of his focus was on interest rates staying higher for longer across Latin America with inflation peaking over the next month, he also noted that the lack of full transparency over new oil exploration licenses, is adding to Peso volatility on the currency markets. Touching on the Peso, thus far this week it has weakened slightly, in line with other emerging market currencies.

At the same conference, Director of Public Credit Acosta highlighted the success of recent bond issuances which reflect confidence – foreign investors remain key to this.

President Petro saw his approval level slip in the latest survey from Datexco. Colombians are rarely optimistic and there was an increase (to 55%) of those who feel the country is going the wrong way. Still well down on a year ago but moving upwards – Petro’s own approval level slipped from 54% in October to 44% in February.

There are sixty pages to wade through, but sticking with the oil theme, Minister of Mining & Energy Velez is rated at 2.1 (out of 5) – the lowest within the cabinet. That said, no-one is hitting it out of the ballpark. Within that space, the president is beginning to make his moves on taking more control over the energy sector in terms of pricing; a situation that local companies are deeply concerned about.

Please find below the LinkedIn Video :

https://www.linkedin.com/posts/rupert-stebbings-927b6316a_colombia-economy-oil-activity-7029782125629341696-qXQL?utm_source=share&utm_medium=member_desktop

Have a wonderful weekend.

Roops