The Event

Following this week’s total rout in the oil market, the question of when Venezuela is likely to experience a “credit event” is now been asked in terms of months, not years.

Slumping crude prices have investors bracing for a messy default in Venezuela, where the sovereign and state-owned oil company PDVSA have some US$10bn in external debt payments due this year.

With crude hovering around US$28 per barrel, Venezuela – which on Wednesday reportedly requested an emergency OPEC meeting – could have trouble satisfying its obligations

Barclays said the country will have difficulty avoiding a credit event in 2016 – and that is based on the bank’s forecast of US$37 oil, almost $10 higher than current prices.

The Street seems to feel The Event can probably be averted next month, when $2.228 bn worth of VENZ payments come due. The much more likely freakout date? October 16th, when much of the rest of the year’s PDVSA debt comes due.

Again, the mind staggers a bit to consider the potential for chaotic feedback loops between the Political Clock and the Economic Clock around that time. By October, Venezuela is likely already in outright hyperinflation or something that looks very much like it, and the opposition is likely finished collecting signatures for a recall referendum, which CNE is likely to try to delay as long as possible.

Now, if you’re CNE and looking for a date to hold that referendum…are you really likely to overlook the fact that October 16th is a Sunday?

 

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