Saudi, Russia reach deal on oil cuts, raising pressure for compliance

DUBAI/MOSCOW - OPEC leader Saudi Arabia and non-OPEC Russia have agreed a preliminary deal to extend existing record oil output cuts by one month while raising pressure on countries with poor compliance to deepen their cuts, OPEC+ sources told Reuters.

OPEC+ agreed to cut output by a record 9.7 million barrels per day, or about 10% of global output, in May and June to lift prices battered by plunging demand linked to lockdown measures aimed at stopping the spread of the coronavirus.

Rather than easing output cuts in July, OPEC and its allies, a group known as OPEC+, were discussing keeping those cuts beyond June.

"Saudi Arabia and Russia are aligned on the extension for one month," one OPEC source said.

"Any agreement on extending the cuts is conditional on countries who have not fully complied in May deepening their cuts in upcoming months to offset their overproduction," the source said.

The group also considered holding an online meeting on June 4 to discuss output policy, after Algeria, which holds the presidency of the Organization of the Petroleum Exporting Countries, proposed bringing forward a meeting planned for June 9-10.

The OPEC source said that an earlier meeting on June 4 is also conditional on compliance and that the discussions now are about implementing criteria for those countries who have not fully complied with the oil cuts and how they can compensate for their overproduction in the coming months.

OPEC members Iraq and Nigeria has shown weak compliance with its output reduction targets in May. OPEC/O

Kazakhstan also failed to fully meet its obligations under the OPEC+ oil cut pact, sources said.

Two sources also told Reuters that Gulf OPEC producers Saudi Arabia, Kuwait and the United Arab Emirates are not discussing extending their deeper voluntary oil cuts of 1.180 million bpd beyond June.

Oil prices rose in recent days from the lows of April buoyed by a continuing recovery in China, the epicenter of the coronavirus outbreak, while other economies are slowly opening up after lockdowns to contain its spread.

"Overall the market is moving in the right direction with the gradual easing of the lockdown. But we still need to be cautious. There is always a risk of another wave of the coronavirus," the first OPEC source said.

"The other thing is how quickly will demand patterns recover. Inventories are still above average levels and that needs to be tackled." (Reporting by Rania El Gamal and Olesya Astakhova, editing by Louise Heavens and David Evans)

-reuters-

Iran president: State firm found new oilfield with 53 billion barrels of crude

DUBAI—Iran has discovered a new oilfield in the southwest of the country that has the potential to boost its reserves by about a third, President Hassan Rouhani said on Sunday.

"Workers and the exploration arm of the National Iranian Oil Co. . . . have found an oilfield with 53 billion barrels of reserves," Rouhani said in a televised speech in the central city of Yazd.

The field stretches over 2,400 sq km in the oil-rich Khuzestan province, Rouhani said.

Iran ranks as the world’s fourth–largest reserve holder of oil, and the second-largest holder of gas reserves, according to the U.S. Energy Information Administration (EIA).

Iran had an estimated 157 billion barrels of proved crude oil reserves in January 2018, the EIA website said.

Since withdrawing from Iran's 2015 nuclear deal with world powers, the United States has reimposed sanctions to strangle its vital oil trade.

(Reporting by Dubai newsroom; Editing by Elaine Hardcastle)

source: news.abs-cbn.com

Oil edges up on Iran sanctions, but US supply and strong dollar weigh

SINGAPORE - Oil prices edged up on Wednesday on expectations of tighter markets once US sanctions target Iran’s petroleum industry from next month, although a strong dollar and rising US crude supply curbed gains.

Brent crude oil futures were at $84.89 per barrel at 0646 GMT, up 9 cents from their last close.

US West Texas Intermediate (WTI) crude futures were up 7 cents at $75.30 a barrel.

Traders said global oil markets remained tense because of the looming US sanctions against Iran’s oil exports, which kick in from Nov. 4.

Brent and WTI earlier this week both reached levels last seen in November 2014, and the two contracts have risen by around 20 and 17 percent respectively since mid-August.

Despite this, traders said prices were held back by a strong dollar which makes oil imports more expensive for countries using other currencies domestically, as well as by climbing supply in the United States.

US commercial crude inventories rose by 907,000 barrels in the week to Sept. 28 to 400.9 million, the private American Petroleum Institute (API) said on Tuesday. Refinery crude runs fell by 158,000 barrels per day (bpd), API data showed.

Official weekly government data is due from the Energy Information Administration (EIA) on Wednesday.

Traders said the rising stocks were partly due to a relentless increase in US crude oil production, which has jumped by a third since mid-2016 to a record 11.1 million bpd.

“We expect U.S. crude production to exit the year at 11.3 million bpd,” Barclays bank said in a note on Tuesday.

That would mean the United States challenges Russia as the world’s biggest crude oil producer.

On the demand side, fuel consumption is strong, growing especially fast in Asia’s emerging economies.

However, high crude prices, combined with widespread emerging market currency weakness, threaten growth.

“That oil prices are rising to elevated levels at the same time as emerging market currencies hit record lows will be a flashing signal to OPEC members that demand may be at risk of a sharp correction,” said Emirates NBD bank.

source: news.abs-cbn.com

Trump to OPEC: 'Reduce pricing now!'

WASHINGTON -- US President Donald Trump again accused the Organization of Petroleum Exporting Countries of driving gas prices higher on Twitter on Wednesday and urged the oil cartel's members to do more.

"The OPEC Monopoly must remember that gas prices are up & they are doing little to help. If anything, they are driving prices higher as the United States defends many of their members for very little $’s. This must be a two way street. REDUCE PRICING NOW!" Trump wrote on Twitter.

The Republican president has lashed out at the petroleum group in recent weeks. Rising gasoline prices could create a political headache for Trump before the November mid-term congressional elections by offsetting Republican claims that his tax cuts and rollbacks of federal regulations have helped boost the US economy.

In a tweet on Saturday, Trump said Saudi Arabia had agreed to increase oil output by up to 2 million barrels per day, an assertion that the White House rowed back on in a subsequent statement.

The leader of Saudi Arabia, OPEC's biggest member, has assured Trump that the kingdom can raise oil production if needed and that the country has 2 million barrels per day of spare capacity that could be deployed to help cool oil prices to compensate for falling output in Venezuela and Iran.

Trump has been complaining about OPEC at the same time that Washington is piling pressure on its European allies to stop buying Iranian oil.

source: news.abs-cbn.com

OPEC to continue pumping oil at current rate

VIENNA - OPEC is set to carry on pumping oil nearly flat-out for months more, content that last year's shock market therapy has revived demand and knocked back growing competition.

With oil prices having stabilised, at around $65 a barrel, some $20 above their January lows, there's little appetite within the Organization of the Petroleum Exporting Countries to modify production limits.

"There is consensus among Gulf OPEC countries, and others, to keep the ceiling unchanged," a senior Gulf OPEC delegate told Reuters late on Tuesday after an informal meeting of the four core Gulf Arab OPEC members earlier in the day.

Iraqi oil minister Adel Abdel Mahdi said there was "optimism and general acceptance with the current situation".

The group meets on Friday following a two-day seminar featuring the chief executives of the world's biggest energy groups, including BP and Exxon, companies whose fortunes have been abruptly altered by OPEC's decision to abandon efforts aimed at sustaining oil prices at more than $100 a barrel in favour of defending market share.

"Nobody wants to rock the boat," the Gulf source said. "The meeting is expected to be smooth sailing."

OPEC Secretary-General Abdullah al-Badri said on Wednesday that it would likely be a brief meeting.

"Everything is very clear."

That marks a change in tone from OPEC's last meeting in November 2014, when Venezuela and others mounted an unsuccessful bid to convince Saudi Arabia and its Gulf allies to tighten the taps on supply.

Instead, the kingdom laid out its new laissez faire approach, saying it will no longer consider cutting output without the cooperation of non-OPEC producers such as Russia.

This time calls for collaboration have been muted.

The Gulf source said the outlook for the oil market is positive, especially in the second half of this year, which Qatar's oil minister Mohammed al-Sada said should be "more balanced".

"You can see that I'm not stressed, I'm happy," Saudi oil minister Ali al-Naimi said on Monday.

IRAN'S RETURN

There may still be some choppy moments. Iran is seeking to clear space for its gradual return to the oil market after years in which sanctions halved its oil exports to as little as 1 million barrels per day (bpd), an official said on Monday.

However, even if Iran and world powers meet a June 30 deadline for finalising a pact on gradually winding back nuclear-related sanctions, most analysts expect it will be months, if not a year or more, before Iran's production begins to recover, leaving OPEC little reason to sort it out now.

"Due to heightened uncertainty with an (Iran nuclear) deal, we think OPEC is likely to take a wait-and-see approach to the prospect of additional oil," analysts at Barclays wrote.

Some analysts, including those at Morgan Stanley, have raised the remote possibility that OPEC might surprise the market by increasing the output ceiling, now set at 30 million bpd. Some of OPEC's 12 members have dismissed that option.

source: www.abs-cbnnews.com

OPEC has no choice but to keep output unchanged- Kuwait

KUWAIT - OPEC has no choice but to keep its market share and shun oil output cuts, Kuwait's oil minister said on Thursday, reiterating the view from the emirate that the group will hold its course when it meets next in June.

"Of course we are concerned because the price of oil will affect our budget ... within OPEC we don't have any other choice than keeping the ceiling of production as it is because we don't want to lose our share in the market," Ali al-Omair told reporters in Kuwait city.

Many OPEC oil ministers, including Saudi Arabia's Ali al-Naimi, have defended the group's November decision not to cut production but instead defend market share and curtail the output of more expensive producers such as the United States.

The accord pushed oil prices below $50 per barrel, extending a sharp decline that began in June amid a global glut of crude and weakening demand.

Since the oil price collapse, OPEC officials have said they wanted non-OPEC producers to cooperate with the group but those attempts have made little progress.

"If there is any type of arrangement with (countries) outside OPEC, we will be very happy," Omair said on Thursday, without elaborating.

Oil prices have recovered slightly since to over $60 a barrel, but have fell again over the past days. Brent crude for May delivery fell towards $55 a barrel on Thursday following a bigger than expected crude stock build in the United States that fueled concerns of an oversupply in the world's largest oil consumer.

Omair said he expected higher prices by the end of the year.

"There are indications that at end of 2015 the economic growth rates will improve and this would make the prices improve," he said.

OPEC has said it believes oversupply, as much as 1.5 million barrels per day, will evaporate as oil demand picks up and U.S. oil production growth slows.

However, should U.S. oil producers prove more resilient than OPEC expects, the glut could persist and grow if Western powers and Iran reach a nuclear deal allowing Tehran to increase its oil exports.

source: www.abs-cbnnews.com

Saudi oil policy uncertainty unleashes conspiracy theorists

LONDON - If Saudi Oil Minister Ali al Naimi wants to stop conspiracy theories spreading before a crucial OPEC meeting next week, it's too late.

Naimi's intervention last week after a two-month silence failed to address a question energy markets want answered: is the OPEC leader no longer willing to defend oil prices which have dived by a third to their lowest since 2010, and is it pursuing new commercial or even geopolitical goals?

Despite Naimi's insistance that Riyadh wants stable markets, diplomatic and market sources say Saudi officials told recent private briefings that the kingdom can live for some time with current, or even lower, levels.

Reading Saudi oil policies has long been like Kremlinology - understanding the politics of that other secretive power, Russia. The next OPEC meeting on Nov. 27 is taking this art to a new, higher level.

A number of explanations have been offered to fill the information vacuum on Riyadh's intentions and they aren't all from the usual conspiracy theorists in Russia and Iran, which are at loggerheads with the kingdom.

Oil market watchers are divided on the outcome of the meeting in Vienna. Predictions range from a large OPEC production cut to revive prices through a small cut to none at all.

Even those who have known Naimi for decades are puzzled. "For the first time, I really do not know what is likely to happen at the meeting. It is not clear," said a long-serving senior OPEC delegate.

When Naimi finally spoke on Nov. 12, he said Riyadh's desire for stable markets had not changed.

"Saudi oil policy... have been subject a great deal of wild and inaccurate conjecture in recent weeks. We do not seek to politicise oil ... For us it's a question of supply and demand, it's purely business," he said.

According to four market and diplomatic sources, who asked not to be named, Saudi officials briefed OPEC watchers privately in New York and Riyadh in September and October.

Nasser al-Dossary, Saudi Arabia's national representative to OPEC, Naimi's deputy Prince Abdulaziz bin Salman and the kingdom's OPEC governor Mohammed Al-Madhi attended at least one of these meeting to give the message that, with its large currency reserves, the kingdom was prepared to withstand oil prices as low as $70-$80 per barrel for up to a year.

Benchmark Brent crude oil slipped to $79 on Tuesday.

Most members of the cartel apart from Saudi Arabia need much higher prices to balance their budgets but ironically are unable or unwilling to reduce their output to counter a global glut caused by slowing economic growth in China and Europe, just as U.S. oil production booms.

SEEING OFF SHALE OIL

Should the Saudis tell fellow OPEC members, badly suffering from the oil price collapse, that they will not cut output, debate will intensify on what prompted the policy shift.

One possibility is Riyadh wants to see off U.S. shale oil, which is believed to need much higher prices than conventional production to remain competitive. "They are after U.S. shale," said one participant in the meetings with Saudi officials.

However, the source added that the Saudis might also regard low prices as an opportunity to put even more pressure on Iran and Russia for supporting Syrian President Bashar al-Assad, an arch-enemy of Riyadh, in the country's civil war.

Several Saudi oil sources have denied over the past month that geopolitics are now driving the policy, but they have failed to stifle theories that Riyadh and Washington are working together to hold down prices.

"What is the reason for the United States and some U.S. allies wanting to drive down the price of oil? To harm Russia," Nicolas Maduro, president of fellow OPEC member Venezuela, said last month.

Masoud Mirkazemi, an Iranian lawmaker and former oil minister, said Riyadh was helping the G20 group of major economies. "Saudi Arabia, which intends to manage OPEC, serves the interests of the G20 group," he said.

"GLOBAL OIL WAR"?

In Russia, the idea of a Saudi-U.S. plot against Moscow has become common currency as the economy struggles under the effects of low oil prices and Western sanctions imposed over its annexation of Crimea and support for rebels in eastern Ukraine.

Leonid Fedun, a co-owner of private oil firm Lukoil, cited President Barack Obama's visit to Riyadh in March. "Obama travelled to meet the king of Saudi Arabia just after the Crimea events to push him to these actions (to lower the oil price)," Fedun, whose firm has large U.S. assets, said last month.

Russia and Iran routinely allege U.S. plots against their economies, but the conspiracy theories are spreading.

"Is it just my imagination or is there a global oil war underway pitting the United States and Saudi Arabia on one side against Russia and Iran on the other?" New York Times columnist Thomas Friedman, wrote last month.

U.S. Secretary of State John Kerry sidestepped the issue after a trip to Saudi Arabia in September. Asked if past discussions with Riyadh had touched on Russia's need for oil above $100 to balance its budget, he smiled and said: "They (Saudis) are very, very well aware of their ability to have an impact on global oil prices."

source: www.abs-cbnnews.com

Russia hit by USD 50-B Yukos ruling

LONDON - Russia has been ordered to pay Yukos shareholders a record USD 50 billion in compensation over its seizure of the defunct oil giant, lawyers said on Monday, in a new blow on top of sanctions over the Ukraine crisis.

An arbitration court in The Hague ruled that Russia forced Yukos -- formerly owned by ex-tycoon Mikhail Khodorkovsky -- into bankruptcy with excessive tax claims and sold its assets to state-owned businesses led by energy giant Rosneft for political purposes.

Russia was defiant in the face of the judgement with Foreign Minister Sergei Lavrov vowing that the state would "use all of its legal options to defend its position", with the claimants who now face a further battle to claw back their cash.

Rosneft also stood by its purchases as fully lawful.

Yukos was once Russia's biggest oil company but was broken up after Khodorkovsky was arrested in 2003, shortly after President Vladimir Putin warned Russia's growing class of oligarchs against meddling in politics.

Tim Osborne, executive director of GML Ltd, the main shareholder and claimant in the case, told a news conference in London that the tribunal "unanimously confirmed that the attacks by the Russian Federation on the Yukos oil company ... were politically motivated."

The award was the "largest in arbitration history", GML said in a statement.

Osborne said the ruling would hurt investment in Russia, which is already in the spotlight over the escalating crisis in Ukraine, while companies close to Vladimir Putin's regime are braced for tougher sanctions.

"I suspect at the moment Russia is a place where not many people are going to be investing," Osborne told the press conference.

Khodorkovsky -- who is no longer a shareholder and is not a party to the legal proceedings -- praised the verdict and slammed Russian leaders.

'Historic award'

"It is fantastic that the company shareholders are being given a chance to recover their damages," said the businessman, who was released last year after more than a decade in prison.

"The Yukos case has been an instance of unabashed plundering of a successful company by a mafia with links to the state," he said in a statement on his website.

Yukos was sold off in opaque auctions to state companies led by Rosneft. The government firm was then a small player but today stands as the world's biggest stock market listed oil company by production volumes.

That process clouded the reputation of Russia as a place to do business, and investment sentiment has plunged since the annexation of Crimea, fighting in eastern Ukraine, and the uncertainty this has created.

The claimants will now try to prove in international courts that Rosneft is the "alter ego of the state", meaning that if Moscow does not pay up, then they can recoup some of the money by seizing the energy giant's international assets, their main lawyer Emmanuel Gaillard said.

"This is an historic award," Gaillard said.

"It is now judicially established that the Russian Federation's actions were not a legitimate exercise in tax collection but, rather, were aimed at destroying Yukos and illegally expropriating its assets for the benefit of State instrumentalities Rosneft and Gazprom."

Rosneft -- which is targeted by US sanctions over Russia's actions in Ukraine -- said all its dealings in respect of Yukos were "fully lawful."

It said that it "does not consider that the company could be issued any demands due to the published ruling or that the ruling could have a negative effect on the commercial activities or assets of the company."

BP link

Osborne, when asked if claimants would consider pursuing BP -- a 20-percent shareholder in Rosneft -- warned: "I think it is safe to say that nobody is safe".

The claims against Moscow were brought in 2005 by Hulley Enterprises Limited and Veteran Petroleum Limited, two subsidiaries of former majority shareholder GML Limited, both based in Cyprus.

A claim was also brought by Veteran Petroleum Ltd., the pension fund set up by GML for the benefit of former Yukos employees.

The claimants had demanded a total compensation package of $100 billion (74 billion euros), four times their total investments in the now-defunct firm, to take into account what it would be worth today, plus interest.

The arbitral tribunals at the Permanent Court of Arbitration unanimously held that the Russian Federation had effectively expropriated the claimants' assets, according to the ruling on the PCA website.

But it explained on its website that it had not awarded them the whole $50 billion because there was "some contributory fault on behalf of claimants, leading them to reduce the amount of damages awarded."

source: www.abs-cbnnews.com