Fixed oil price strong buy9 May 2020 13:58
In principle, it will be in force until December although it could be revised in case of increases in international crude oil. Despite supporting the decision, YPF could feel the impact of the measure.
The national government will re-establish the so-called “Creole” barrel for the price of oil, with the aim of avoiding layoffs of employees in the companies in the sector, providing greater predictability to investments in Vaca Muerta and, above all, supporting the governors of the hydrocarbon provinces so that their collection does not collapse.
Therefore, the publication of the decree signed by President Alberto Fernández is imminent, which will set the national reference price of crude oil at $ 45.
The measure was taken after various negotiations and meetings, amid a complex global scenario for oil, which collapsed due to the pandemic and oversupply. Yesterday, the barrel of Brent (benchmark in the country) lost another 0.9% and closed at $ 29.46.
From the Government they assured that they are "urgent and transitory measures", that they do not want to "put social peace at risk", and that the ultimate goal is to sustain the self-sufficiency of hydrocarbons, employment and energy security in the country. In addition to the nearly 10,000 jobs that depend on activity in the sector, upon resuming production, royalties will also begin to grow for the provinces, hungry for resources amid the collapse of the collection.
Thus, the initiative was supported by provinces such as Chubut, Formosa, Jujuy, La Pampa, Mendoza, Neuquén, Río Negro, Salta, Santa Cruz and Tierra del Fuego, which are part of the Federal Organization of Hydrocarbon Producing States (OFEPHI) .
"The idea is to have a reference price that avoids that the projects that are operating in Argentina, even with a low level of activity, do not end up closing under a negative scenario," explained the Minister of Productive Development Matías Kulfas, who the Wednesday he held a virtual meeting with managers of the country's main oil companies. The “Creole” barrel will be valid, in principle, from May 1 to December 31, 2020, with the possibility of revision every three months, by the Hydrocarbons Undersecretariat. If the price of Brent oil exceeds US $ 45 for 10 consecutive days, the price of the "Creole" barrel is suspended.
Meanwhile, the companies did not receive the measure unanimously: they would have preferred to avoid it and reach an agreement by negotiating between the parties. And, although it backed the decision politically, YPF (along with the rest of the so-called integrated oil companies and refiners) will feel the impact of the measure. It is that these companies will pay the provinces royalties of $ 45, when their sales will be $ 30. That is why from YPF they pointed out that, although the Creole barrel is "a great effort, the need is understood." This sacrifice is explained, above all, when analyzing the numbers of the state-owned oil company: it is that, for example,
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