Venezuelan debt hinges on high oil prices

Market enthusiasm has risen after Donald Trump replaced Nicolás Maduro, but even with a recovery in oil output and a likely debt restructuring the country would probably need much higher oil prices to generate enough foreign currency to service its external debt.

Market enthusiasm around Venezuela has grown since Donald Trump replaced Nicolás Maduro. Investors are hoping sanctions will ease so oil output can recover and the country can reconnect with global markets. Analysts say that even with a production rebound and substantial debt relief, Venezuela would likely need higher oil prices to support external debt payments. Breakingviews' estimates show only limited foreign currency would be available to service debt under plausible recovery scenarios. Key facts: - Expectations of sanctions relief have risen since the leadership change, after oil production fell below 1 million barrels per day following 2017 restrictions. - Analysts estimate external liabilities near $169 billion (about 173% of GDP); a Breakingviews scenario finds roughly $6.5 billion a year would be available to service external debt if production rose to 2.5 million barrels per day and WTI stayed near $60. - A debt restructuring appears likely and markets are pricing substantial haircuts (the article notes bond market values imply about a 79% haircut), but the timing and terms remain undetermined. Summary: Even with revived oil exports and a large debt haircut, Venezuela would probably need much higher oil prices to create sustained capacity to borrow and service external obligations. Undetermined at this time.