Posts Tagged ‘OPEC’

OPEC Votes To Increase Output

June 22, 2018

OPEC ministers strike deal on oil production levels

  • A source confirmed to CNBC that a deal has been struck and a statement critical of the U.S. that Iran wanted to include would not be in the final communique.
  • A report from Reuters put the agreed upon level at a boost in oil output by around 1 million barrels per day (bpd).
  • The market is awaiting a press conference with oil ministers for more details on the agreement.

Khalid Al-Falih, Saudi Arabia's energy and industry minister, arrives ahead of the 174th Organization Of Petroleum Exporting Countries (OPEC) meeting in Vienna, Austria, on Friday, June 22, 2018.

Stefan Wermuth | Bloomberg | Getty Images
Khalid Al-Falih, Saudi Arabia’s energy and industry minister, arrives ahead of the 174th Organization Of Petroleum Exporting Countries (OPEC) meeting in Vienna, Austria, on Friday, June 22, 2018.

OPEC ministers and their allied partners meeting in Vienna have agreed on oil production levels starting from July.

Sources confirmed to CNBC that a deal has been struck, and the group will aim to restore about 1 million barrels per day (bpd) to the market. However, industry sources familiar with the oil cartel’s deliberations said the actual increase is likely to total around two-thirds of Saudi Arabia’s target.

That’s because some OPEC members would be unable to sufficiently ramp up crude production. Analysts say supply increases are more likely to fall in a range between 600,000 to 800,000 bpd.

OPEC is not expected to actually release a hard target, but the figures align with comments from ministers that the group will strive to stop overshooting its 18-month-old deal to keep 1.8 million bpd off the market. Output among the 24 nations has actually fallen by about 2.8 million bpd, due largely to cratering production in Venezuela and supply disruptions elsewhere.

The market is awaiting a press conference with oil ministers for more details on the agreement.

Saudi Energy Minister Khalid al-Falih said Friday morning that no-one should expect to see an “immediate flood” of oil coming back onto the market following the meeting.

He also warned the world could face a supply deficit of 1.8 million bpd in the second half of 2018 and that it was OPEC’s responsibility to alleviate consumers’ concerns.

OPEC’s agreement with Russia and other producers to limit oil output has helped to clear a global supply overhang that weighed on prices for years. But with crude futures recently soaring to multi-year highs on strong demand, dwindling output from Venezuela and renewed U.S. sanctions on Iran, energy ministers are worried about the market overheating.


Saudi Arabia pushing Iran closer to Opec deal

June 22, 2018
Oil cartel seeks to cool a price rally that has taken crude prices to highest level since 2014
Image may contain: ocean, sky, outdoor and water

Anjli Raval and David Sheppard in Vienna

Saudi Arabia on Friday led Opec in pushing Iran closer to a deal to unwind supply curbs by up to 1m barrels per day, as the cartel and its allies tried to find a way to cool a price rally that has taken crude to the highest level since 2014.

Khalid Al Falih, the kingdom’s energy minister, said on Friday he was hopeful producers could reach an agreement, with Saudi Arabia engaging in private talks with Iran and Russia to bring on more barrels amid pressure from consumers including the US.

Bijan Zanganeh, Iran’s oil minister, said producers were “cooking something” but it was unclear if the main sticking point — how to distribute any raises — had been resolved.

Oil prices have risen above $80 a barrel in recent weeks as Opec and Russia-led supply cuts coincided with robust demand and unplanned outages from countries such as Venezuela.

Iran had opposed any change in the original agreement in the lead up to the meeting, arguing crude prices received an additional boost after the US reimposed sanctions on its oil exports and any new deal would mean Opec was acting on behalf of President Donald Trump.

“There was a lot of discussion about listening to consumers, but clearly the one at 1600 Pennsylvania Avenue is overweight in influence and cannot be easily ignored, “ said Helima Croft at RBC Capital Markets.

Mr Falih said that while a headline figure of 1m barrels per day was being proposed by most ministers — to be shared among Opec and non-Opec producers — he said the actual level of increases could be lower as some countries were unable to boost output.

Before the meeting, Saudi Arabia was said to seek an outcome that would return 600,000-800,000 barrels per day of real crude to the market.

The existing cuts, which have been in place between Opec and its allies since January 2017, have far exceeded the original target of 1.8m barrels per day due to unplanned outages in countries including Venezuela, Angola and Libya.

Mr Falih said the proposal on the table would bring compliance within Opec back to 100 per cent. By sticking broadly within the limits of the existing deal, this might placate Iran.

Still, Raad Alkadiri of the Boston Consulting Group said: “The Iranians and other producers who can’t raise output are understandably concerned about what is in it for them. There’s been a lot of focus on the politics but the economics are arguably even more important.”

Iran’s oil minister said before the meeting that he agreed that raising production would be a “responsible” outcome for consumers but emphasised that he saw $70 a barrel as a “good” price for oil.

That is a level Saudi Arabia is also said to be loath to see prices fall below, illustrating part of the delicate balancing act Opec and its allies are trying to achieve.

While Iran’s oil minister reiterated on Friday that Opec is not an organisation to “take instructions from President Trump”, Saudi Arabia — a key ally of Washington — has felt pressure from the US and other big oil consumers, including China and India, to stop prices rising further.

As the meeting got under way late on Friday morning, Brent crude, the international benchmark, was up 1.7 per cent at $74.31 a barrel.

Mr Falih said the vast majority of members backed an increase and he hoped “reason will ultimately prevail.”

Saudi Arabia has allied with Russia — who is not an Opec member — since 2016 and are looking to formalise an arrangement between the cartel and Moscow.

Alexander Novak, the Russian energy minister, has backed an output increase with the country’s energy companies keen to raise production. Non-Opec countries, led by Russia, will meet with the cartel on Saturday and will probably rubber stamp any agreement reached between Opec producers on Friday.

“The last few days have seen at least a certain degree of tentative alignment in terms of opinions and have increased chances for a consensus-driven supply increase,” analysts at JBC Energy in Vienna said.

“In particular, the acknowledgment — crucially also by Iran — that dealing with the unintended over-compliance is a feasible and acceptable approach towards effectively getting more oil to the market, is encouraging.”


Saudi and Iranian energy ministers meet privately ahead of Opec meeting

June 22, 2018

The energy ministers of Saudi Arabia and Iran held last-minute talks ahead of the Opec meeting on Friday

Image may contain: 1 person, suit

Saudi Arabian Energy Minister Khalid al-Falih floated a plan Thursday to raise oil production by about one million barrels a day. PHOTO:STEFAN WERMUTH/BLOOMBERG NEWS

By David Sheppard 

The energy ministers of Saudi Arabia and Iran held last-minute talks ahead of the Opec meeting on Friday, Iran’s Shana news agency reported.

The talks will be seen as a last-ditch attempt by Saudi’s Khalid al Falih to have Iran’s Bijan Zanganeh back an Opec and Russia-led proposal to agree an oil output increase of 1m barrels a day.

Image result for Bijan Zanganeh, photos

Iran’s Bijan Zanganeh

Iran has opposed the increase, arguing it is a response to US pressure to lower oil prices, which jumped after Washington reimposed sanctions on Tehran’s crude exports.

Mr Zanganeh left a technical meeting of the producer group last night saying talks were not going well.

The start of the Opec meeting in Vienna has been delayed while the talks are ongoing.


Iran Throws Wrench Into OPEC Plan to Lift Production

Saudi minister says there is broad support for proposal to raise crude output by one million barrels a day

VIENNA—Iran said late Thursday it was still opposed to a deal to lift oil output, fraying a sense of consensus among OPEC members and putting it at loggerheads with Saudi Arabia, the cartel’s de facto leader.

The surprise move—after signals throughout the day that Iran was warming to an agreement—heightens uncertainty about whether Saudi Arabia can maintain discipline among members of the Organization of the Petroleum Exporting Countries as it seeks to dole out more oil to thirsty global markets. Riyadh has led OPEC in a pact with Russia and a handful of other non-OPEC members in whittling down a large surplus of crude that has kept prices low for years.

That deal, reached in 2016, displayed an uncommon level of compliance among global producers. Now, with Iran openly rebelling, that sense of discipline is threatened.

Saudi Arabia, its Persian Gulf allies and Russia can move ahead with an increase without Tehran. But OPEC decisions are usually unanimous. Disarray inside the group could signal to markets the tightly coordinated oil policy among the Riyadh- and Moscow-led group is coming apart.

Representatives of other influential OPEC members, including Nigeria and Iraq, in comments to reporters after a late-night technical meeting Thursday, said they backed a plan pushed by Saudi Energy Minister Khalid al Falih to boost output by one million barrels day. Mr. Falih said he had support from an “overwhelming majority” for the one-million-barrel increase.

Mr. Falih also said a working group of OPEC members and nonmembers had agreed to back the proposal. OPEC meets Friday to make a final decision.

Iran can’t raise output on its own, partly because new U.S. sanctions are likely to keep buyers away. But Iran’s intransigence would challenge Riyadh’s authority in the group. Analysts and officials have worried that could lead to a free-for-all among other producers, who might be tempted to open the taps to compete for market share—driving down prices.

“There still some time left to negotiate until the meeting starts on Friday, ‎but (it) is likely to be a tough one,” said Giovanni Staunovo, commodity strategist at UBS.

OPEC meetings are often contentious right down to the last minute, and Iran in particular has frequently clashed with Saudi Arabia over output decisions. Tehran has used this OPEC meeting to accuse Riyadh of bowing to U.S. demands to pump more oil. Washington has asked Saudi Arabia to provide more oil amid the new sanctions on Iran, according to people familiar with the matter. President Donald Trump has tweeted that prices are too high and has blamed OPEC.

Earlier in the day, a relatively smooth meeting looked possible. Iran’s oil minister arrived early in the week vowing to reject any output increase. But by Thursday officials familiar with the Iranian delegation’s thinking expected a compromise. Mr. Falih floated the plan to lift daily output by one million barrels.

That was more than Riyadh had originally wanted but far less than the 1.5 million barrels a day Moscow was seeking. The plan was enough to convince traders more oil was coming to market and sent crude prices down.

Hours later, though, Iran’s Oil Minister Bijan Zanganeh said he was still far from convinced a deal was close. “I don’t think there will be an agreement,” he told reporters.

Mr. Falih and Russian counterpart Alexander Novak have said they are willing to ease up on the 2016 output cut the two countries orchestrated. That pact reduced output by about 2% of global production at the time—or about 1.8 million barrels a day.

More recently, though, it has led to sharply higher crude prices and complaints from consumer countries like the U.S. and Asian buyers. OPEC has traditionally worried that too-high oil prices could curb demand.

On paper, the plan circulated by Mr. Falih on Thursday is bigger than what he and other OPEC allies have floated recently in response to Russia’s entreaties. As recently as Wednesday, he was pushing a plan to increase the group’s output by 500,000 barrels a day, according to people familiar with the matter.

But behind the scenes, people familiar with the matter say, Thursday’s proposal is more in line with what the Saudis and allies have been advocating all along. Because of output constraints, the current proposal would eventually amount to just 600,000 barrels a day of additional crude, they say.

The Saudi plan, officials have previously said, would consist of a first boost by OPEC’s 14 member states and a group of 10 Russia-led allies amounting to about 500,000 barrels a day in the third quarter. This would then be followed by the same amount in the fourth quarter.

But many members of the group are limited in how much they can lift output. Several are pumping flat out, while a few OPEC members, including Libya, Venezuela and Iran, are dealing with output constraints. Rebels have attacked Libyan ports, reducing exports. An acute economic crisis has hit Venezuelan production. U.S. sanctions threaten to bottle up Iranian crude.

That all means the OPEC and non-OPEC group would only really be adding about 600,000 barrels a day in new crude output, people familiar with the matter said.

Write to Summer Said at, Benoit Faucon at benoit.faucon@wsj.comand Christopher Alessi at

Appeared in the June 22, 2018, print edition as ‘Iran Threatens To Sink OPEC Deal On Output Boost.’


OPEC showdown looms as Iran, Saudi argue over output hike

June 22, 2018

OPEC ministers are bracing for a stormy meeting in Vienna Friday where they will discuss a Saudi proposal to hike oil output despite fierce resistance from Iran, setting the stage for a showdown between the arch foes.

At stake is the fate of an 18-month-old supply-cut deal between members of the Organization of the Petroleum Exporting Countries and allied countries credited with clearing a global oil glut and lifting crude prices.

But Saudi Arabia, backed by non-member Russia, says the time has come to raise production to meet growing demand and appease major consumer countries like the United States, India and China who have complained about the spike in prices.

“Our customers have spoken loudly and we must listen to them,” Saudi Energy Minister Khalid al-Falih said at a technical meeting on the eve of the OPEC gathering in Vienna.

But hopes of a compromise were dealt a blow when Iranian Oil Minister Bijan Namdar Zanganeh walked out of the meeting early, telling reporters: “I do not think an agreement can be reached.”

Image result for Bijan Namdar Zanganeh, photos

Iran has bristled at the thought of easing the output ceiling at a time when its oil industry is facing renewed sanctions over US President Donald Trump’s decision to quit the international nuclear deal with Tehran.

However Riyadh, which cheered Trump’s move, is under pressure from its US ally to open the spigots as Trump hopes for lower pump prices ahead of November’s mid-term elections.

Iran’s Zanganeh, speaking to reporters on the sidelines of a Vienna seminar earlier this week, accused Trump of trying to politicise OPEC and said it was US sanctions on Iran and Venezuela that had helped push up prices.

Venezuela, in the throes of an economic crisis that has slashed its petroleum production, is also opposed to changing the oil cartel’s output policy, as are several other countries who would struggle to immediately increase production.

But Saudi Arabia has the backing of Russia, which is facing mounting calls from domestic oil firms to end the cutbacks so they can cash in on the higher oil prices.

Russian Energy Minister Alexander Novak, who attended Thursday’s technical meeting, said it was “very important” not to allow the oil market to “overheat”.

– Face-saving compromise? –

The 14-nation OPEC cartel and its 10 non-member partner nations, known as OPEC+, together account for more than 50 percent of the world’s oil supply, giving them huge sway over the global market.

The deal they initially agreed called for production to be trimmed by 1.8 million barrels per day, but OPEC claims production restraints and geopolitical factors have actually seen output fall by far more, to around 2.8 million bpd.

Speaking after Thursday’s meeting, ministers said they would recommend lifting production by a nominal one million barrels a day at Friday’s OPEC meeting and Saturday’s gathering of non-OPEC partners.

“Not every country can meet this number,” admitted Saudi’s Falih, in a nod to the problems in Venezuela, Iran and Libya, where clashes between rival factions have damaged key oil infrastructure.

The Saudi- and Russia-led proposal would allow several hundred thousand more barrels of oil to come to the market without however amending the milestone pact — paving the way for a face-saving compromise with Iran.

But Iraqi Oil Minister Jabbar al-Luaibi suggested it was far from a done deal.

The proposal was approved by a majority, but “not everybody”, he told reporters.


Asian Stocks End Ugly Week With China On The Edge of a Bear Market

June 22, 2018

Regional markets continue their divergence from the rest of the world

Performers celebrate the Dragon Boat Festival in Shanghai June 18. Tensions between the Chinese and U.S. governments are hitting Asian markets.
Performers celebrate the Dragon Boat Festival in Shanghai June 18. Tensions between the Chinese and U.S. governments are hitting Asian markets. PHOTO: FANG ZHE/ZUMA PRESS

Asian stock markets were mixed Friday, following a fall in U.S. equities the day before, with the impact of trade tensions between the American and Chinese governments worrying investors. Japan’s Nikkei 225 fell 1.1% despite better-than-expected Japanese manufacturing data. China’s Shanghai Composite Index rose by 0.3%, recovering slightly after losses in early trading.

Tuesday’s Big Theme

It’s been an ugly end to an ugly week for Asian markets, which have continued their divergence from the rest of the world.

What’s Happening

China’s Shanghai Composite Index is down by more than 19% from its January peak, hovering on the edge of bear market territory during intraday trading. A bear market is usually defined as a fall of 20% or more from a recent high.

Breaking BadIn recent months Asian and U.S. stocks havediverged, with American equities less severely impacted by trade tensionsEquity index performance during the lastthree monthsSource: Factset
%MSCI USAMSCI Asia ex-JapanApril ’18MayJune-7.5-5.0-

Indexes in Vietnam and the Philippines have already broken through those levels, having declined by more than a fifth from highs which they reached in April and January respectively.

The impact of escalating rhetoric on trade has been hitting Asian equities harder than other regions, particularly in the last week. Many economies in the region are export-intensive, and are linked to Chinese supply chains. The Shanghai Composite is down over 6% this week, compared with a 1.2% fall for the S&P 500.

While U.S. equities have risen during the last three months as tit-for-tat tariff threats have continued, the MSCI Asia ex-Japan is down by over 5%.

Japanese equities have been less severely affected, with the Nikkei down just 1% for the week. The country’s manufacturing purchasing managers’ index came in at 53.1 for June on Friday morning, stronger than analysts expected. Any figure over 50 indicates the sector is expanding.

Market Reaction

Equity strategists are rethinking their outlooks for Asian stocks, with both Morgan Stanley and Goldman Sachs cutting back their year-end forecasts this week.

“The wide range of products on which the tariffs are to be imposed has the potential for material impact on complex supply chains in a wide range of industries,” said Morgan Stanley analysts Friday. The bank now expects a further 8% fall in the MSCI Asia ex-Japan Index by the end of the year.

Not all analysts are turning bearish, however.

The balance of risk and reward offered by Asian equities has improved after the recent selloff, according to UBS strategist Niall MacLeod, who still expects the region’s stocks to record 12% growth in earnings-per-share this year. “There are of course risks,” he said, “but as these stand they don’t alter the fundamental picture much.”


Oil prices rose, with Brent Crude up 1.2% to $73.91 per barrel ahead of an OPEC meeting in Vienna, after the Iranian government reiterated its opposition to increases in output. The dollar was roughly flat Friday, with the ICE U.S. Dollar Index up 0.1%, after falling Thursday.

Write to Mike Bird at


Asian traders on course to end painful week with losses

June 22, 2018

Asian investors were on course to end a tumultuous week with more losses on Friday as the prospect of a debilitating global trade war hung over regional markets.

As European Union tariffs on key US goods — including jeans, bourbon and motorcycles — came into effect, there were fears China and the US will carry through with their own threats, locking the world’s three biggest economies in a potentially destructive face-off.

© AFP | Asian markets have taken a hit this week on fears about a possible global trade war

The EU move was in retaliation to Donald Trump’s decision to hit steel and aluminium imports from the bloc, and comes after the US and China traded tit-for-tat threats on hundreds of billions of dollars of goods.

There are worries a full-blown flare up could pummel the global economy just as it is getting back on its feet after the global financial crisis.

“We have a trade war — and it’s an escalating trade war,” SEB chief economist Robert Bergqvist told AFP in an interview.

“Investors… are more cautious today, they are waiting for the right time to reduce their exposure in stock markets.”

New York’s three main indexes ended down — with the Dow suffering an eighth straight loss — as investors were spooked by news that Daimler had cut its profit forecasts because of new levies on cars exported from the US to China.

“We heard from Daimler about the impact of the trade tensions on sales, and there are a growing number of stories about the chance of China directly targeting US firms who do business in the country,” said Greg McKenna, chief market strategist at AxiTrader.

“What comes to pass is still uncertain in that regard. What’s not uncertain, though, is the resolve of US Commerce Secretary Wilbur Ross to pursue China and try to change it — and other nations’ — actions.”

– Optimistic view –

Tokyo ended the morning session 0.9 percent lower, while Hong Kong and Shanghai — which have led losses in Asia this week — were both 0.5 percent lower in the morning.

Singapore shed 0.4 percent and Sydney was flat, while Manila, Wellington, Taipei and Jakarta were also lower.

Seoul was up slightly.

However, while trading floors are mostly a place of gloom, John Chong, head of the investment-banking arm Maybank Kim Eng, was more upbeat for the outlook.

“Asia is now better positioned to weather the volatility,” he said at a conference in London.

“We believe investors will see real value emerging in Asian corporates after the recent market tantrums and should capitalise on the opportunity.”

On currency markets, the pound held its ground after rising on the back of news that the Bank of England’s top economist had backed lifting interest rates despite Brexit uncertainty.

And the euro was up slightly after eurozone ministers declared the end of Greece’s eight-year debt crisis with debt relief and a big cash payout as part of a broad bailout exit deal.

Oil prices rallied more than one percent ahead of an output decision from the Organization of the Petroleum Exporting Countries, which kicks off a key meeting in Vienna later in the day.

Kingpin Saudi Arabia and non-member Russia are pushing to raise an 18-month-old ceiling but others want to keep the status quo.

However, while an increase is widely expected there are concerns of a split in the cartel — which accounts for about 40 percent of global production — with Iran’s oil minister walking out of a key meeting with OPEC peers.

– Key figures around 0300 GMT –

Tokyo – Nikkei 225: DOWN 0.9 percent at 22,500.45 (break)

Hong Kong – Hang Seng: DOWN 0.5 percent at 29,148.21

Shanghai – Composite: DOWN 0.5 percent at 2,862.22

Euro/dollar: UP at $1.1610 from $1.1607 at 2100 GMT

Pound/dollar: UP at $1.3256 from $1.3245

Dollar/yen: UP at 110.02 yen from 109.96 yen

Oil – West Texas Intermediate: UP 86 cents at $66.40 per barrel

Oil – Brent Crude: UP 95 cents at $74.00 per barrel

New York – Dow Jones: DOWN 0.8 percent at 24,461.70 (close)

London – FTSE 100: DOWN 0.9 percent at 7,556.44 (close)

Iran to resist Saudi-led push to increase oil output

June 20, 2018

Brent rises to nearly $76 a barrel as Tehran and Riyadh clash ahead of Opec meeting

Image may contain: ocean, sky, outdoor and water

By Anjli Raval and David Sheppard in Vienna, and Kathrin Hille in Moscow

Iran’s oil minister will resist a Saudi Arabia-led push to raise crude output, putting the two Middle East rivals on a collision course ahead of a closely watched Opec meeting at the end of the week.

Bijan Zanganeh said he did not believe a deal to relax production cuts, put in place nearly two years ago amid a global supply glut, could be reached at the oil cartel’s meeting, insisting the group was not an “American organisation”.

“Opec is not an organisation to receive its instruction from President Trump,” Mr Zanganeh said on arriving in Vienna for the talks.

The remarks sent Brent crude, the international benchmark, up more than 1 per cent to $75.86 a barrel in early London trading on Wednesday before it pared some of its gains. That is still off three-year highs of more than $80 a barrel reached before Saudi Arabian and Russian officials held talks on output cuts.

Russia, the largest non-Opec crude producer, and Saudi Arabia have been in talks to ease production curbs since May amid pressure from Donald Trump, who has publicly chastised Opec for high prices.

In addition to the US president’s admonishment, his administration has more quietly asked producers — widely believed to include Saudi Arabia, a US ally and rival of Tehran — to ease output restrictions to make up for any drop in exports from Iran, whose oil industry is facing a new round of US sanctions.

Moscow wants Opec and its allies outside of the cartel to allow 1.5m barrels a day to return to the market, Russian energy minister Alexander Novak told reporters in Minsk on Tuesday.

Although Saudi Arabia has engaged in talks with Russia over an increase of around 1m b/d, the 1.5m b/d figure is higher than has previously been discussed and would probably face a backlash from rival producers.

Mr Zanganeh said unanimity was required on every policy decision, adding: “I don’t believe in this meeting we can reach an agreement.”

He blamed the Trump administration for higher prices by imposing sanctions on Iran and Venezuela, two founding members of Opec. “The high price has been created by his actions.

“Opec is not part of the department of energy from the United States,” he said. “It is not a political tool to be used against some countries.

“A high price supports shale production in the United States. But because of public opinion in the US against the high price he [President Trump] wants Opec to change the situation.”

Iran has maintained it is unfair for others to take advantage of its antagonistic relationship with the US. Iraq, meanwhile, has said unleashing more supplies could trigger renewed price falls. Still, Jabar al-Luaibi, the country’s oil minister, appeared to soften his tone on his arrival in Vienna, saying he hoped there would be an agreement.

Privately, Saudi Arabia is briefing delegates and analysts that it is seeking an increase of between 300,000 b/d and 600,000 b/d. It wants to ensure any additional barrels are brought on gradually and wants to avoid renewed oil price falls.

Three Opec delegates have said that the latest 1.5m b/d figure from Russia is part of an orchestrated attempt to ensure prices stay in check when an output increase is announced later this week.

One person said the move has unnecessarily aggravated other members who do not agree with unwinding the production cuts. Another said there was still no agreement on how any potential increase would be shared among producers.

Mr Novak said prices were “balanced” enough to absorb a steep production increase.

It’s Trump Sanctions, Not OPEC, That’s Boosting Oil

June 17, 2018

The threat of Iran’s oil output disappearing is driving up prices.

A support vessel flying an Iranian national flag sails alongside the oil tanker Devon.

Photographer: Ali Mohammadi/Bloomberg

As OPEC oil ministers prepared to meet in Vienna later this week, President Trump fired another twitter-shot across their bows. But it is his decision to slap sanctions back on Iran that is the real driving force behind the rising price of oil.

The U.S. president has accused OPEC of being “at it again” for the second time in as many months through his favored 280-character diplomatic channel. Quite what “it” is, he has never specified.

I am always a bit confused about what people actually mean when they accuse the group of artificially raising the price of oil. OPEC doesn’t set it — and hasn’t done so for more than 30 years.

Perhaps the president is railing at the fact that some members of the group have spent millions of dollars creating production capacity that they aren’t using. Seen in another light, that surplus is a vital safety valve in the event of a sudden loss of supply — such as the one that occurred when U.S.-led forces invaded Iraq in 2003, or when Western-backed rebels overthrew Libya’s Moammar Al Qaddafi in 2011. OPEC’s spare capacity has been used to compensate for sudden supply disruptions more often than America’s strategic petroleum reserve.

There is no reason that OPEC should pump as much oil as President Trump, or anyone else, wants. The organization exists to look after the interests of its members. Some of them might see appeasing the United States as being in their best interests. Others clearly do not.

It was less than two years ago that candidate Trump’s energy adviser Harold Hamm told Bloomberg Businessweek that OPEC was “irrelevant.” A little over a month later the same Harold Hamm said it was “high-time” for the irrelevant OPEC to agree on a production freeze to raise prices.

No-one expects politicians, or their advisors, to be consistent. And oil at $67 a barrel is very different to oil at $46. Back then, U.S. shale oil production was on the slide and needed a savior. It found one in Saudi Arabia’s then Deputy Crown Prince Mohammed Bin Salman and oil minister Khalid Al-Falih, who reversed the kingdom’s “pump-at-will” policy and began to set oil prices on the path to recovery.

Now Saudi Arabia is once again at the forefront of a group of OPEC countries urging other members to do as America wishes — this time by raising output. The about-face comes hard on the heels of Al-Falih’s assertion just eight weeks ago that OPEC’s market-balancing job wasn’t yet done and that output restraint needed to be prolonged.

What changed in that eight weeks? The outlook for the availability of Iranian oil. Trump’s decision to pull out of the nuclear deal and re-impose sanctions will reduce the volume of crude available from the country by an unknown amount.

I have said from the outset that the amount of Iranian oil that will be forced off the market will be more than when sanctions were previously in force — even without the EU bans on purchases that accompanied U.S. curbs last time around. Analysts are now starting to ratchet up their forecasts of the volume that could be lost.

The curbs will be more extensive than under President Obama — targeting Iran’s exports of condensates as well as crude oil — and waivers will be harder to come by. Tanker owners and insurers may already be reacting to the imposition of sanctions, even before they come into effect.

It is the fear that the world is about to lose as much a million barrels a day of Iranian crude oil exports by the end of the year, and possibly another 500,000 barrels from Venezuela, that has really driven oil prices higher — not OPEC.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Julian Lee at

To contact the editor responsible for this story:
Edward Evans at

Austria angry at Germany over ‘enormous’ spy effort

June 17, 2018

Vienna has demanded an explanation from Berlin over reports that Germany’s BND agency spied on nearly 2,000 targets in Austria between 1999 and 2006. Austrian media said embassies were among the targets.

A general view shows an overcast sky in Vienna

Top Austrian officials have called on Germany to clarify reports that its BND spy agency snooped on high-profile targets including embassies, international organizations, Austrian ministers and banks based in the Austrian capital.

“The scale of the surveillance was enormous,” Austrian Chancellor Sebastian Kurz said of the spy effort, which reportedly involved around 2,000 targets and took place between 1999 and 2006.

Talking to reporters at a specially convened press conference in Vienna, Kurz said his government had already contacted German authorities and demanded more information on who was spied on and when the effort was ended.

“We want to have certainty that [the surveillance] ended, and if data were saved, our request is of course for it to be deleted,” Kurz said.

Read moreGermany’s NSA spying committee presents controversial report

Same old, same old?

Earlier this week, Austrian newspaper Der Standard and profil magazine reported that Germany’s BND was mostly snooping on diplomatic representatives in Vienna, including embassies of the US, Iran, Iraq, Pakistan, Libya, Afghanistan, Israel and North Korea.

The agency also monitored phone numbers and other means of contact in the Organization of Petroleum Exporting Countries, the Organization for Security and Cooperation in Europe and the International Atomic Energy Agency. The BND was apparently also keeping tabs on dozens of private companies, including weapons manufacturers and other key exporters, but also Austrian ministries, Islamist movements and even the country’s news agency APA.

The two media outlets said the information was provided to them by a German source.

However, it was not immediately clear if the latest revelations were linked with a similar scandal in 2015, when the BND was accused of helping US intelligence agencies spy on several European countries, including Austria.

Spying among friends

Following revelations by NSA whistleblower Edward Snowden in 2013, German Chancellor Angela Merkel slammed the US for its extensive spying on targets in Germany. “Spying among friends is not at all acceptable,” she famously said in the wake of the scandal.

The quote came back to haunt Merkel with the subsequent revelation of BND’s role in the spying.

On Saturday, however, Austrian President Alexander Van der Bellen seemed to echo the comments by saying that “spying among friendly states is not just unusual and unwanted, it’s unacceptable.”

In Germany, a parliamentary committee in charge of controlling the intelligence agencies said it was already looking into the allegations and attempting to determine how much of it was new information. It announced that the first results should be expected by the end of the coming week.

dj/kw (AFP, AP, Reuters, dpa)

China and India Want to Buy More U.S. Oil to Counter OPEC

June 14, 2018

Two of Asia’s largest crude buyers are considering teaming up to buy U.S. supplies and counter OPEC’s dominance in the world’s biggest oil market.

Image result for U.S. oil wells, sunset, photos

India and China are discussing ways to boost imports of U.S. crude to Asia, a move aimed at reducing their dependence on cargoes from members of the Organization of Petroleum Exporting Countries, according to an Indian government official. The two nations want to put pressure on OPEC producers to keep prices under control, he said in New Delhi on Wednesday, asking not to be identified because of internal policy.

Image result for Interfax Global Energy, photos

The potential collaboration between the two major oil buyers would present another challenge for OPEC, which is facing competition for market share in Asia from the flood of crude pumped in the Gulf of Mexico and shale fields of Texas. The group is also contending with internal differences: Saudi Arabia favors easing output curbs implemented last year after they succeeded in shrinking a global glut, while Iran, Iraq and Venezuela oppose boosting production.

“Diversification of supply sources will benefit both India and China by increasing competition among oil producers,” said Abhishek Kumar, an analyst at Interfax Global Energy in London. “Procuring oil at the cheapest price is vital for the two energy hungry Asian consumers.”

The output reductions by OPEC and allies including Russia helped oil rebound from the worst crash in a generation, weighing on the economies of consuming nations. Prices last month were further boosted to the highest level since 2014 after a U.S. decision to reimpose sanctions on Iran threatened to curb exports from the Islamic Republic and as economic turmoil in Venezuela hurt the Latin American nation’s output.

For the International Energy Agency view’s on Iran and Venezuela output, click here.

Indian oil minister Dharmendra Pradhan said last month that he had expressed concern about rising crude and its negative impact on consumers and the Asian nation’s economy to Saudi energy minister Khalid Al-Falih. The trading unit of China’s biggest refiner has cut supplies from OPEC’s biggest producer in recent months, citing costly oil pricing by the Middle East nation.

Oil Alliance

The oil-buying alliance may initially be made up of India and China, with South Korea and Japan — also major buyers — joining the club later, the Indian government official said on Wednesday. While OPEC countries are still the dominant suppliers to Asia, almost all big importers in the region have increasingly turned to U.S. crude after a four-decade ban on American exports was lifted in late 2015.

China’s Ministry of Commerce didn’t immediately reply to a fax seeking comment. Nobody responded to two calls made to South Korea’s Ministry of Trade, Industry and Energy. Masato Sasaki, the director of Japan’s Ministry of Economy, Trade and Industry’s oil and gas division, said he wasn’t aware of the India-China talks or any request for his nation to join the potential alliance.

Wang Yilin, the chairman of state-owned China National Petroleum Corp., the nation’s biggest energy company, met with the chairman of refiner Indian Oil Corp. in Beijing and talked about deepening cooperation in oil and gas businesses, according to a post on the Chinese company’s website on June 11.

American President Donald Trump, meanwhile, on Wednesday renewed his Twitter assault on OPEC, pushing the case for oil to be lower a week before the cartel meets to discuss production policy. The U.S. is said to have lobbied Saudi Arabia and other members, arguing they need to raise output by 1 million barrels a day to keep prices in check.

— With assistance by Heesu Lee, Sarah Chen, Aibing Guo, and Tsuyoshi Inajima