It's Time To Start Freaking Out About Oil Prices

It's Time To Start Freaking Out About Oil Prices

Inflationistas vs. Deflationistas: What Does CPI and PPI Tell Us?

Inflationistas vs. Deflationistas: What Does CPI and PPI Tell Us? 

July 18, 2011 06:46: CEST

Author: Econophile -  zero hedge

This article originally appeared in the Daily Capitalist.
Inflationistas are probably confounded by Friday's Consumer Price Index report that showed a decline of 0.2% in June. The report pins the decline, the first since June 2010, on falling energy costs. As a large component of CPI it:

declined 4.4 percent in June, the largest decline since December 2008. The gasoline index, which fell 2.0 percent in May, declined 6.8 percent in June. (Before seasonal adjustment, gasoline prices fell 5.8 percent in June.) Despite the recent declines, the gasoline index has increased 35.6 percent over the past 12 months. 

On the other hand, the deflationists are probably using the data to confirm their belief that we are in a deflation.
The data shows that "core" price inflation, all items less food and energy, was still +0.3%, and up 1.6% for the year. The broad CPI-U was up 3.4% for the year. Core was up 0.03% for the second month, the biggest back-to-back gain in two years.
Some key items:

[E]nergy dropped 4.4 percent, following a 1.0 percent decline. Gasoline fell 6.8 percent after decreasing 2.0 percent in May. Within the core new vehicles increased 0.6 percent, used cars and trucks jumped 1.6 percent, and apparel increased 1.4 percent in June. And owners' equivalent rent is no longer as soft as in recent months, rising 0.2 percent.

 

Food:  The food index rose 0.2 percent in June after rising 0.4 percent in each of the prior two months. The index for meats, poultry, fish, and eggs turned down in June, falling 0.4 percent after increasing more than one percent in each of the previous four months. The fruits and vegetables index declined for the third month in a row in June, falling 0.3 percent as the fresh vegetables index continued to decline. In contrast, other major grocery store food groups increased. The index for cereals and bakery products rose 0.6 percent in June, and the dairy and related products advanced 0.5 percent, as did the index for other food at home. The index for nonalcoholic beverages increased 0.3 percent as the coffee index continued to rise. The index for food at home has risen 4.7 percent over the last 12 months, with all the major groups increasing 3.2 percent or more. The index for food away from home rose 0.3 percent in June after rising 0.2 percent in May.

 

There are some things to take away from this report. Core is still trending upward, but oil seems to be declining and bringing CPI down. Oil is not based so much on market factors as it is by OPEC. Supply and demand has an impact on these prices, but as we all know, OPEC can influence prices by increasing or decreasing production. Thus when economist look at CPI they like to remove the impact of oil to see if they can get a better read on the data without the influence of OPEC.
I would not entirely agree with that. If demand was superfluous to OPEC, then prices wouldn't fluctuate as much as they have. As demand for oil grows, oil prices rise worldwide. But, I believe prices rise not only because of demand, but because of the impact of a devalued dollar. And we aren't the only country in the world that is devaluing their currency. So, I believe it is possible to look at oil much as any other commodity that impacts our cost of living, regardless of OPEC's impact. All I know right now is that demand is down worldwide because of falling industrial production, and prices have fallen. It shouldn't be excluded from CPI calculation and that is why CPI went down.
As my readers know, I believe "inflation" is an increase of money supply brought about by the Fed, and that price increases are an effect of inflation. To distinguish this from the common definition of "inflation," I will refer to price increases as "price inflation." The reason we are not seeing rapid price inflation is that money supply growth has been rather modest considering the Fed's attempts to pump the economy full of money and credit. Quantitative easing is an inefficient way to create price inflation, at least as compared to an expansion of money and credit by banks. And as we all know, banks aren't lending robustly these days.
But the Fed is indeed pumping money, and monetary inflation is the reason we aren't seeing deflation. True (Austrian) Money Supply (TMS2 - green line) exploded post-Crash until January, 2010, dropped like a rock until, late 2010, when it started growing again. See this chart from Michael Pollaro which I have amended with the dates of QE1 and QE2:

As you can see, the Fed has been pushing on a string, attempting to create price inflation and prevent "deflation." They think they have succeeded in the deflation part, but they are dissatisfied with their attempts at inflation.
The next monetary data report should show more growth in TMS2. QE1 kept TMS2 expanding for about 10 months after it stopped in March, 2009-- through January, 2010, when it collapsed again. I would expect the effect of QE2 to be shorter than QE1 because of the post-Crash chaos has been resolved to the extent that now positions are known and we are in a slow but steady debt liquidation process. This liquidation phase is much stronger than the Fed realizes and the resolution of malinvestment is going slowly, no thanks to them. This hampers the formation of new capital and discourages businesses from expanding as the economy remains in the doldrums. Thus more monetary steroids loses its efficacy as this process continues.
So, as an inflationista, why haven't we seen prices go crazy? Let me summarize my thoughts:

1. Inflation is a monetary phenomenon, and price inflation is a result of it.
2. Price inflation is caused by an expansion of the money supply.
3. There is no such thing as demand-pull price inflation, or that we cannot have price inflation because capacity utilization of factories is low.
4. In order for prices to really take off, money supply needs to take off.
5. We have had a roller coaster of monetary stimulus through QE, causing significant gyrations in money supply.
6. QE (helicoptering money into Wall Street) has a lesser impact on money supply than bank money and credit expansion. It works, it just doesn't have the multiplier bang for your buck.
7. Money supply growth has been historically lower as compared to prior inflations that expanded through bank credit (see 2001 on the chart above).
8. The monetary impact of QE2 is not done yet, but it will have a shorter impact on money supply than QE1.
9. CPI prices are increasing modestly. The producer price index (PPI) is showing much higher price increases and this is starting to squeeze wholesalers and retailers. They will attempt to raise prices.
10. A question arises as to whether or not price increases will be accepted by consumers since wage growth has been flat. I believe increases will be rejected by consumers who will further restrict consumption in response. Or, retailers will swallow the difference, see profits squeezed, and either way, the economy will be harmed from monetary expansion.
11. Ultimately the CPI will rise further, especially if the Fed does QE3, which I believe will happen. Flat-to-declining growth will put pressure on the Fed to act. A low CPI (or PCE) and stagnating employment will encourage the Fed to do QE3 to revive a moribund economy.
12. That will lead to continued stagnation.
13. The key to recovery will be the liquidation of malinvestment and its related debt. It is happening, but the process is slow and more money pumping will only slow it down further.
14. Stagflation.

Read more…

Five reasons high oil prices are probably here to stay

Five reasons high oil prices are probably here to stay - Frank Holmes

   

The new geopolitics of oil, the continued decline of the U.S. dollar and increasing demand arejust some of the reasons why higher oil prices are likely to be with us for some time

Author: Frank Holmes
Posted:  Tuesday , 12 Apr 2011

SAN ANTONIO (U.S. Global Investors) - 

A number of forces continued to push oil prices higher last week, reaching their highest levels in the U.S. since September 2008.
One factor fueling the run has been the continued decline of the U.S. dollar. You can see from the chart that oil and the dollar historically are negatively correlated. This means that a rise in oil prices generally coincides with a decline in the dollar, and vice versa. The U.S. dollar has seen a dramatic decline since the beginning of the year as oil prices have moved some 30 percent higher. This could be due to fact that roughly two-thirds of the U.S. trade deficit is related to oil imports.

Despite the run up, oil's upward rate of change is still within its normal trading pattern over the past 60 trading days. Accordingly, this may imply that it isn't a spike and we haven't crossed into the extreme territory like we experienced in 2008 and 2009.
Conversely, oil prices are positively correlated with gold prices, which also saw a bounce this week. Looking back over the past one- and 10-year periods, oil and gold have roughly a 75 percent correlation. This means that three out of four times, when prices for one go up, prices for the other increase as well.
Another factor pushing prices higher is the seasonal strength that oil prices historically experience leading into the summer driving season. This chart shows the five-, 15- and 28-year patterns for oil prices. You can see that prices historically bottom in February before rising through the end of the summer.

We discussed in detail how these seasonal factors affect oil prices a few weeks ago. Click here to read "Oil's March Madness a Boost for Refiners."
Rising oil prices are also a result of what the Financial Times calls the "new geopolitics of oil." The FT says three elements creating this new environment are becoming clear:
Young populations with high unemployment rates and a skewed distribution of income are a volatile combination for the people in power.
To placate these groups, oil-producing countries are increasing public expenditures.
Governments are also to extend energy subsidies to shelter the country's consumers from rising energy prices.

A Deutsche Bank chart plots the share of population under the age of 30 for selected North African and Middle Eastern countries against the unemployment rate of this group. You can see that large oil producers such as Saudi Arabia have a high level of unemployment among youth populations.
This is why King Abdullah of Saudi Arabia has announced a total of $125 billion worth (27 percent of the country's GDP) on social programs for the public. For King Abdullah, this is the cost of keeping peace but has driven up the breakeven price for Saudi oil production to $88 per barrel, according to the FT.
Keeping these young populations happy and working is not only domestically important for these governments but for global oil markets as well. You can see from this chart that a significant portion of the world's oil production comes from the Middle East.

With the unrest in Libya-a top-20 oil producer-essentially knocking out the country's entire production, any further unrest in another country could threaten global supply. Upcoming elections in Nigeria have the potential to disrupt production for the world's fifteenth-largest producer.
But it's not just geopolitics that is threatening production. Natural decline rates from mature fields such as Mexico's Cantarell oil field are starting to make a dent in global production. Reuters reported this morning that Norway, the world's eleventh-largest oil producer, is experiencing a significant slowdown in production from the Oseberg oil field in the North Sea. Production is expected to be cut by 26 percent in May to only 118,000 barrels per day.
Meanwhile, oil demand has been picking up significantly in both emerging and developed markets. Oil demand in China and the U.S. has been rising since mid-2009, well before the uprisings began in the Middle East.
In China, a big driver has been growth in the Chinese automobile market. Auto sales increased 2.6 percent in February, and March data released by the Chinese Auto Association over the weekend shows auto sales grew 5.36 percent on a year-over-year basis in March.
The G7 economies have been in an up cycle since last year. In the U.S., employment rates and consumer spending have been steadily improving. Oil prices rising too fast remains a threat to this recovery but BCA Research estimates that oil prices need to rise above $120 per barrel before "significantly undermining consumer and business confidence."
Frank Holmes is CEO and Chief Investment Officer, U.S. Global Investors - www.usfunds.com 
Mineweb.com - The world's premier mining and mining investment website Five reasons high oil prices are probably here to stay - Frank Holmes - ENERGY | Mineweb

Share

_______________________________________

Check it out on The MasterCharts

Gold up, silver at 31-year high on flight to safety

Gold up, silver at 31-year high on flight to safety

CRB Index, Oil, Gold and Copper monthly – a 'transitory' rally for 10 years

http://www.reuters.com/article/2011/03/23/us-markets-precious-idUSTRE72C3Z120110323

You should always listen to the Dr.

Copper: the doctor’s prognosis

Published: March 10 2011 20:03 | Last updated: March 10 2011 22:50

It should come as no surprise that the strong, positive correlation between the world’s two leading industrial commodities has broken down over the past month. Oil has surged 15 per cent on supply concerns while copper is off 9 per cent from the record high of $10,190 a tonne it hit in London trading in part due to fears of what dearer and scarcer crude might do to the world economy. But developments in the Middle Kingdom, not just the Middle East, are affecting copper prices.

China, by far the world’s single largest copper consumer, already outstrips the appetite of what some decades ago was called the “industrialised world.” Its demand for the red metal overtook that of North America and Western Europe combined in 2008 and analysts at Credit Suisse forecast it will be double their consumption by 2013, soaking up a third of all supply.

Given its projected needs for copper-intensive infrastructure, those forecasts seem consistent with economic growth expectations. Even so, the copper market may be ascribing an overly smooth and upward-sloping trajectory for demand in the medium-term. Chinese imports of all industrial commodities took a tumble last month due to the Lunar New Year celebrations, but copper’s fall seems especially sharp. Shipments of 235,000 tonnes were the lowest since January 2009 when prices were a third today’s level.

For some months, local inventories have seemingly grown faster than underlying demand and the discount between local and international prices would have suggested. Some analysts, noting that a large part of Chinese bonded copper inventories have been used as collateral for loans, believe that this artificially stimulated the surge in imports. If so then this could make copper demand doubly-sensitive to Chinese government efforts to slow down credit growth.


Known as “the only metal with a PhD in economics” for its forecasting prowess, perhaps “Dr Copper” was warning us of speculative froth as much as expected growth when it surged earlier this year. If so, more weakness seems likely.

FT.com / Lex - Copper: the doctor’s prognosis

Share

World Oil Transit Chokepoints - Suez Canal/SUMED Pipeline

World Oil Transit Chokepoints
Suez Canal/SUMED Pipeline

The Suez Canal is located in Egypt, and connects the Red Sea and Gulf of Suez with the Mediterranean Sea, spanning 120 miles. Year-to-date through November of 2010, petroleum (both crude oil and refined products) as well as liquefied natural gas (LNG) accounted for 13 and 11 percent of Suez cargos, measured by cargo tonnage, respectively. Total petroleum transit volume was close to 2 million bbl/d, or just below five percent of seaborne oil trade in 2010.
Almost 16,500 ships transited the Suez Canal from January through November of 2010, of which about 20 percent were petroleum tankers and 5 percent were LNG tankers. With only 1,000 feet at its narrowest point, the Canal is unable to handle the VLCC (Very Large Crude Carriers) and ULCC (Ultra Large Crude Carriers) class crude oil tankers. The Suez Canal Authority is continuing enhancement and enlargement projects on the canal, and extended the depth to 66 ft in 2010 to allow over 60 percent of all tankers to use the Canal.

http://www.eia.doe.gov/emeu/cabs/World_Oil_Transit_Chokepoints/Suez.html

World Oil Transit Chokepoints - Suez Canal/SUMED Pipeline

Share

_______________________________________

Check it out on The MasterCharts

Hedge Funds Cut Bets on Rising Gas by 23% as Prices Fall: Energy Markets - Bloomberg

Hedge Funds Cut Bets on Rising Gas by 23% as Prices Fall: Energy Markets

By Asjylyn Loder - Aug 16, 2010

Hedge funds slashed their bets on rising natural gas to the lowest level this year as prices fell, a sign the fuel may repeat last year’s 19 percent August slide during a so-far quiet hurricane season in the Gulf of Mexico.

Hedge funds and other large speculators cut their bullish bets by 23 percent in the week ended Aug. 10, the Commodity Futures Trading Commission reported. Natural Gas has declined 14 percent this month, dropping to $4.228 per million British thermal units today on the New York Mercantile Exchange.

Investors retreated from gas markets this year as prices declined 22 percent amid forecasts that stockpiles will be near record highs by the end of October. Demand for the fuel will be slow to recover as consumer confidence hovers near an eight- month low.

“Last year, we saw prices go significantly below $4,” said Andy Lipow, president of consulting firm Lipow Oil Associates LLC in Houston. “There’s a significant amount of supply out there and the overall economy is really having trouble recovering and growing. The increases in demand for natural gas are going to be slower than people expect.”

Net-long positions in futures and options combined in four natural-gas contracts decreased by 28,719 futures equivalents, or 23 percent, to 94,058 in the week ended Aug. 10, the CFTC data showed.

Whether hedge funds and other large speculators will profit from their short bets remains to be seen, Lipow said.

“We’ve seen funds be big winners and big losers in the natural gas markets,” Lipow said.

Gas futures last year dropped to $2.508 per million Btu on Sept. 3, the lowest price in more than seven years.

Vulnerable Positions

The increase in short positions leaves hedge funds vulnerable to sharp moves higher in prices that would probably accompany the threat of a hurricane heading toward the Gulf of Mexico, said Teri Viswanath, director of commodities research at Credit Suisse Securities USA in Houston.

“We’re right around the corner from the heaviest portion of the hurricane season,” Viswanath said. “Given that possibility, is the market getting ripe for a short squeeze? I think it is.”

The U.S. on Aug. 5 reduced its forecast for the 2010 Atlantic hurricane season to 14 to 20 named storms, down from 14 to 23, because of less activity than expected in the first two months of the season.

Eight to 12 of those storms are expected to become hurricanes, according to Gerry Bell, the lead seasonal hurricane forecaster for the U.S. Climate Prediction Center in Camp Springs, Maryland.

Reduced Gulf Output

The sluggish economy, combined with rising production and inventories, will continue to weigh on gas, Lipow said. The bullish impact of any hurricane will be muted since the Gulf of Mexico accounts for 10 percent of U.S. gas production, down from 17 percent in 2005.

Consumer spending, which makes up 70 percent of the world’s largest economy, may not pick up in the absence of a recovery in the labor market, according to the Federal Reserve. Fed policy makers last week made their first attempt to shore up a recovery they said was likely to be “more modest” than earlier anticipated.

Natural gas inventories rose 37 billion cubic feet to 2.985 trillion in the week ended Aug. 6, the Energy Department reported Aug. 12. U.S. gas stockpiles at the end of October may reach 3.752 trillion cubic feet, the department said in an outlook on Aug. 10. Supplies touched a record 3.84 trillion cubic feet in November 2009.

Price Pressure

“Pressure is likely to continue on the natural gas prices,” Lipow said. “Supply disruptions are minimal and we’re seeing the forecast for storms decline.”

The Atlantic hurricane season so far has had less of an impact than expected on gas production, the department said in the outlook last week. Hurricane Alex and Tropical Storm Bonnie this year reduced production by 8 billion cubic feet, less than the 20 billion the government had expected, the report showed.

The funds’ “view of the market is bearish,” said Tim Evans, an energy analyst at City Futures Perspective in New York. “It’s a flow of selling that has weighed on prices, and we’ve got to get through that before prices can rise.”

The measure of net longs includes an index of four contracts adjusted to futures equivalents: Nymex natural gas futures, Nymex Henry Hub Swaps, Nymex Henry Hub Penultimate Swaps, and ICE Henry Hub Swaps. Henry Hub in Erath, Louisiana, is the delivery point for the Nymex futures, a benchmark price for the fuel.

To contact the reporter on this story: Asjylyn Loder in New York at aloder@bloomberg.net

Hedge Funds Cut Bets on Rising Gas by 23% as Prices Fall: Energy Markets - Bloomberg

Share|

_______________________________________

Check it out on The MasterTech Blog

pdvsa $ price/bbl

pdvsa $ price/bbl

Gold Chart in $US - Since The 1982 Low

Gold Chart in $US - Since The 1982 Low
http://www.the-privateer.com/chart/gold-pf.gif

Crude Oil Drops After $25 Gain on Final Day of October Contract

Crude Oil Drops After $25 Gain on Final Day of October Contract

By Margot Habiby

Sept. 23 (Bloomberg) -- Crude oil for November delivery fell as the dollar rebounded from a one-month low and after the October contract climbed more than $25 a barrel in its final trading day yesterday, a record one-day gain.

Oil rose to its highest since Aug. 21 yesterday as traders scrambled to unwind positions on the October contract, the dollar declined the most against the euro since January 2001 and on speculation a proposed $700 billion U.S. bailout package for the finance industry may bolster the economy and shore up demand.

``The dollar will be the focal variable in the coming days because the Treasury proposition and the bailout plan could have a significant impact on the dollar,'' said Christopher Edmonds, the managing principal of FIG Partners Energy Research & Capital Group in Atlanta.

Crude oil for November delivery fell 74 cents, or 0.7 percent, to $108.63 a barrel at 9:13 a.m. Sydney time on the New York Mercantile Exchange. Yesterday, the contract rose $6.62, or 6.4 percent, to $109.37 a barrel.

Oil has risen 20 percent since Sept. 16 as lawmakers pledged fast consideration of the Treasury's plan to buy devalued mortgage-related securities.

The October contract rose $16.37, or 17 percent, to expire at $120.92 a barrel yesterday on the Nymex. It touched $130 in intraday trading, as traders who sold the October contract last week, when oil dipped close to $90, had to buy the futures back.

Traders `Squeezed'

In a squeeze, a trader has gone short by selling contracts betting that the price will decline. In the last days before the contract expires the trader must buy back the same number of futures or be forced to deliver the underlying oil.

The Commodity Futures Trading Commission is ``closely monitoring'' yesterday's gain in oil prices on Nymex for potential manipulation, the agency's acting chairman said.

``We are working closely with Nymex compliance staff to ensure that no one is taking advantage of the current stresses facing our financial marketplace for their own manipulative gain,'' Acting Chairman Walter Lukken said in a statement.

The dollar was little changed at $1.4793 per euro at 8:35 a.m. Sydney time, from $1.4774 yesterday. It has rebounded since dropping 2.1 percent yesterday to $1.4866, the weakest level since Aug. 22, on concern the U.S. bailout package, which would buy assets from financial firms, would inflate the budget deficit.

``Traders are trying to figure out what this bailout and stimulus package is and what it means,'' Edmonds said. ``To say that it means the consumer is alive and well and energy demand is going to pick up to pre-dip levels is way, way premature. At some point in the not-too-distant future, this package has to be paid for, and the economic repercussions are pretty significant for the taxpayer.''

`Economic Slowdown'

Crude oil prices are ``too high'' because the global economic slowdown may spread and cut consumption, the International Energy Agency's deputy executive director said yesterday.

``The economic slowdown in the U.S., Europe hasn't gotten into China, India much, but at some point you have to presume it will,'' William Ramsay said in an interview in Bangkok yesterday.

The Paris-based IEA, which advises 27 developed nations on energy policy, was set up in 1974 in response to the Arab oil embargo.

Brent crude oil for November settlement rose $6.43, or 6.5 percent, to settle at $106.04 a barrel on London's ICE Futures Europe exchange yesterday.

Gasoline for October delivery fell 0.38 cent to $2.70 a gallon in New York. Yesterday, it increased 10.41 cents, or 4 percent, to settle at $2.7038 a gallon in New York. Regular gasoline, averaged nationwide, declined 1.8 cents to $3.739 a gallon, AAA, the nation's largest motorist organization, said today on its Web site. Pump prices reached a record $4.114 a gallon on July 17.

To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net.

Last Updated: September 22, 2008 19:17 EDT
http://www.bloomberg.com/apps/news?pid=20601087&sid=andCaH0jUsc0&refer=home#

Venezuela Denies Oil Assets Frozen: Financial News - Yahoo! Finance

Venezuela Denies Oil Assets Frozen: Financial News - Yahoo! Finance
AP
Venezuela Denies Oil Assets Frozen
Friday February 8, 6:09 pm ET By Fabiola Sanchez, Associated Press Writer

Venezuela Oil Minister Dismisses Exxon Mobil Court Orders As 'Judicial Terrorism'

CARACAS, Venezuela (AP) -- Venezuela's top oil official accused Exxon Mobil Corp. of "judicial terrorism" on Friday, but said court orders won by the oil major do not amount to confiscation of $12 billion (8.3 billion euros) in assets.

Exxon Mobil has gone after the assets of state oil company, Petroleos de Venezuela SA, in U.S., British and Dutch courts as it challenges the nationalization of a multibillion dollar (euro) oil project by President Hugo Chavez's government.

A British court last month issued an injunction "freezing" as much as $12 billion (8.3 billion euros) in assets.

But Oil Minister Rafael Ramirez said: "They don't have any asset frozen. They only have frozen $300 million" in cash through a U.S. court in New York. As for the case in Britain, PDVSA doesn't have "any assets in that jurisdiction that even come close to those sums" of $12 billion (8.3 billion euros), Ramirez said.

Ramirez called it a "transitory measure" while the state company, known as PDVSA, presents its case in New York and London. Exxon Mobil is also taking its dispute to international arbitration, which Venezuela has agreed to.

But Ramirez, who is PDVSA's president, said Exxon Mobil "hasn't respected the terms of the arbitration" and said Exxon Mobil's claims in the Venezuela nationalization dispute "don't even come close to half the sum of $12 billion claimed by them."

Exxon Mobil spokeswoman Margaret Ross said the company had no comment on Ramirez's statements.
Ramirez said the court cases "don't have any affect on our cash flow, don't affect our operational situation at all."

Ramirez said Exxon Mobil sued in New York, London and the Netherlands to dispute the terms under Chavez's nationalization last year of four heavy oil projects in the Orinoco River basin, one of the world's richest oil deposits.

"We don't have any decision by any court that's definitive," Ramirez said. "We have a preventative measure in a court in New York that we have a right to respond to, and we are going to."
He accused the Irving, Texas-based oil major of employing "judicial terrorism" and trying to generate "financial nervousness" around PDVSA.

According to documents filed last month in the U.S. District Court in Manhattan, Exxon Mobil has secured an "order of attachment" on about $300 million (207 million euros) in cash held by PDVSA. A hearing to confirm the order is scheduled in New York for Feb. 13.

In a Jan. 24 "freezing injunction" by a British High Court, the court said that "until the return date or further order from the court," PDVSA "must not remove from England or Wales any of its assets which are in England or Wales up to the value of $12 billion (8.3 billion euros)."

The court also said that if PDVSA disobeys the order, it could be held in contempt of court and be fined or have assets seized.

The credit rating agency Fitch Ratings said the British court order would "have a minimum impact on the company's day-to-day operations, as well as its near-term credit quality and financial flexibility." The agency noted that most of PDVSA's assets are located in Venezuela and the United States, where the company has refineries.

But Fitch Ratings also noted that the outcome of the arbitration process with Exxon Mobil remains uncertain and that "a negative outcome of the arbitration could pressure the credit profile of PDVSA."
Other major oil companies including U.S.-based Chevron Corp., France's Total, Britain's BP PLC, and Norway's StatoilHydro ASA have negotiated deals with Venezuela to continue on as minority partners in the Orinoco oil project.

ConocoPhillips and Exxon Mobil, however, balked at the tougher terms and have been in compensation talks with PDVSA.

Ramirez said Venezuelan officials have had "very important meetings" with ConocoPhillips Chairman Jim Mulva and have made progress toward an agreement. "I think we're on a path to achieving it," Ramirez said.

As for the dispute with Exxon Mobil, Ramirez said "we're going to value fairly what would be its compensation, or not if that be the case."