The international situation is currently playing in favor of the Government, crude could reach US$74, but it would not be lasting, it still represents a relief for its finances.
With a barrel price of US$68.82 registered at the close of yesterday's session on Tuesday, and on track to reach US$70, the country's oil operation begins to find its way again, not only to strengthen its exploration but also to reap great dividends from production.
For the country's hydrocarbon activity, the US$1.18 that separates the current price from crossing the US$70 barrier ensures the investment plan for 2018, which is set between US$4.500 billion and US$4.900 billion.
For the Colombian Petroleum Association, this represents a growth between 30% and 45% compared to what was recorded in 2017.
“This projection occurs amid expectations that the price of Brent crude will remain above US$50 per barrel,” stated Francisco José Lloreda, president of the ACP, at the time.
For Ecopetrol, a company with more than 90% of the oil operation in the country, in 2018 it plans to make investments between US$3.500 billion and US$4.000 billion, which represents an increase of between 35% and 55% compared to the disbursements made in 2017.
“Ecopetrol is conservative in price estimates and does not approve its projects with prices like the current ones,” reiterated a company spokesperson, emphasizing that “after the transformation, the oil company generates profits with a Brent of US$35, half of what is observed today.”.
MACROECONOMIC VARIABLES
Although the price of oil has not yet reached US$70, the level presented so far could provide a cushion that the Government did not have a few months ago. If in January a production of 850,000 barrels per day were recorded and the average price remained above US$68, the Government would have resources of US$330 million that were not budgeted, assuming that for the rest of the year the average did not fall below US$55, which was used for its macroeconomic assumptions in the Financial Plan presented by the Ministry of Finance.
For Luis Alberto Rodríguez, economic analyst, “The drop in oil prices in 2014 caused a deep imbalance in the Government's fiscal accounts, to the point that we needed a tax reform in 2016 to increase revenues. It is very good news that oil prices are on the rise, this will reduce the risks that rating agencies have pointed out in the last three years. However, the country must keep in mind that it is necessary to make structural reforms in tax and public spending matters in the short term, regardless of whether the increase in oil prices is a matter of months or years like the last cycle of high prices.” The favorable behavior of prices could mean relief for the Government, especially thinking about 2019 when it would receive dividends from Ecopetrol. However, Camilo Silva, economic analyst at Valora Inversiones, assures that price corrections could come. “Oil continues to be strong due to tensions in the Middle East and due to reductions and production problems in Syria and Venezuela, where it continues to fall considerably; moreover, OPEC is complying with the agreements to reduce its production, and this will continue to be reflected in better prices. Brent could reach US$71 in the coming days and is starting to reach extreme levels, and the market is beginning to doubt because it has been rising since mid-2017; it could even rise to US$74, so it will correct at any moment. Additionally, the frosts have taken a toll on oil inventories in the United States, but they should recover in three to four weeks,” Silva indicated.
Colombian Association of Oil and Gas