Connect with us

Markets

Bill Allowing U.S. to Sue OPEC Drawing Renewed Interest

Published

on

OPEC meetings concept
  • Bill Allowing U.S. to Sue OPEC Drawing Renewed Interest

With oil prices hitting fresh four-year highs, long-dormant proposals to allow the United States to sue OPEC nations are getting a fresh look in Congress, though they were once considered a longshot to becoming law.

A U.S. Senate subcommittee on Wednesday will hear testimony on the so-called No Oil Producing and Exporting Cartels Act, or NOPEC, which would revoke the sovereign immunity that has long shielded OPEC members from U.S. legal action.

The bill would change U.S. antitrust law to allow OPEC producers to be sued for collusion; it would make it illegal to restrain oil or gas production or set those prices – removing sovereign immunity that U.S. courts have ruled exists under current law.

Past U.S. leaders have opposed the NOPEC bill, but the possibility of its success may have increased due to President Donald Trump’s frequent criticism of the Organization of the Petroleum Exporting Countries, and as some predict that Brent crude, the international benchmark, could reach $100 a barrel before long.

“OPEC is a pet peeve for him,” said Joe McMonigle, senior energy policy analyst at Hedgeye Potomac Research. “Everybody thinks he could easily support NOPEC.”

Saudi Arabia is lobbying the U.S. government to prevent the bill’s passage, sources familiar with the matter said. Business groups and oil companies also oppose the bill, citing the possibility of retaliation from other countries.

OPEC controls output from member nations by setting production targets. Prices are up 82 percent following the cartel’s decision to cut output at the end of 2016, hitting $84 a barrel on Monday, and lawmakers have trained their ire on the group, saying it is again harming consumers and represents interference in free markets.

Wednesday’s hearing before the Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights could give insight into the executive branch’s stance, McMonigle said. One of the witnesses will be Makan Delrahim, assistant attorney general for the Justice Department’s Antitrust Division, who has written in support of such legislation.

A version of NOPEC passed both houses of Congress in 2007 but was shelved after President George W. Bush said he would veto the legislation. Chances of passage this year are slim, as the U.S. House of Representatives is scheduled to be in session only 16 days the rest of this year, leaving little time for anything but must-do legislation like keeping the government funded.

Saudi Arabia, the world’s top oil exporter, is worried that NOPEC could turn into another Justice Against Sponsors of Terrorism Act (JASTA) law, which allows victims of the Sept. 11 attacks in the United States to sue Riyadh, the sources said. The JASTA law is seen as key to why state-run Saudi Aramco was hesitant in publicly listing its shares on U.S. markets in an IPO that has since been shelved.

With close to $1 trillion in investments in the United States, Riyadh has a lot to lose if NOPEC becomes law. Saudi Energy Minister Khalid al-Falih raised concerns about it with U.S. officials, including U.S. Energy Secretary Rick Perry, during private meetings in recent months, two sources told Reuters on condition of anonymity.

Earlier this year, the U.S. Chamber of Commerce and American Petroleum Institute told Congress they opposed the bill, saying surging U.S. energy output had mitigated OPEC’s influence.

Since the U.S. renewed sanctions on Iran this May, other nations, including Saudi Arabia, have agreed to increase production. However, that has not yet stopped oil’s upward climb.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Crude Oil

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

Published

on

Oil

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

Oil retreated from an earlier rally with investment banks and traders predicting the market can go significantly higher in the months to come.

Futures in New York pared much of an earlier increase to $63 a barrel as the dollar climbed and equities slipped. Bank of America said prices could reach $70 at some point this year, while Socar Trading SA sees global benchmark Brent hitting $80 a barrel before the end of the year as the glut of inventories built up during the Covid-19 pandemic is drained by the summer.

The loss of oil output after the big freeze in the U.S. should help the market firm as much of the world emerges from lockdowns, according to Trafigura Group. Inventory data due later Tuesday from the American Petroleum Institute and more from the Energy Department on Wednesday will shed more light on how the Texas freeze disrupted U.S. oil supply last week.

Oil has surged this year after Saudi Arabia pledged to unilaterally cut 1 million barrels a day in February and March, with Goldman Sachs Group Inc. predicting the rally will accelerate as demand outpaces global supply. Russia and Riyadh, however, will next week once again head into an OPEC+ meeting with differing opinions about adding more crude to the market.

“The freeze in the U.S. has proved supportive as production was cut,” said Hans van Cleef, senior energy economist at ABN Amro. “We still expect that Russia will push for a significant rise in production,” which could soon weigh on prices, he said.

PRICES

  • West Texas Intermediate for April fell 27 cents to $61.43 a barrel at 9:20 a.m. New York time
  • Brent for April settlement fell 8 cents to $65.16

Brent’s prompt timespread firmed in a bullish backwardation structure to the widest in more than a year. The gap rose above $1 a barrel on Tuesday before easing to 87 cents. That compares with 25 cents at the start of the month.

JPMorgan Chase & Co. and oil trader Vitol Group shot down talk of a new oil supercycle, though they said a lack of supply response will keep prices for crude prices firm in the short term.

Continue Reading

Crude Oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

Published

on

Crude oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

Oil prices rose on Monday as the slow return of U.S. crude output cut by frigid conditions served as a reminder of the tight supply situation, just as demand recovers from the depths of the COVID-19 pandemic.

Brent crude was up $1.38, or 2.2%, at $64.29 per barrel. West Texas Intermediate gained $1.38, or 2.33%, to trade at $60.62 per barrel.

Abnormally cold weather in Texas and the Plains states forced the shutdown of up to 4 million barrels per day (bpd) of crude production along with 21 billion cubic feet of natural gas output, analysts estimated.

Shale oil producers in the region could take at least two weeks to restart the more than 2 million barrels per day (bpd) of crude output affected, sources said, as frozen pipes and power supply interruptions slow their recovery.

“With three-quarters of fracking crews standing down, the likelihood of a fast resumption is low,” ANZ Research said in a note.

For the first time since November, U.S. drilling companies cut the number of oil rigs operating due to the cold and snow enveloping Texas, New Mexico and other energy-producing centres.

OPEC+ oil producers are set to meet on March 4, with sources saying the group is likely to ease curbs on supply after April given a recovery in prices, although any increase in output will likely be modest given lingering uncertainty over the pandemic.

“Saudi Arabia is eager to pursue yet higher prices in order to cover its social break-even expenses at around $80 a barrel while Russia is strongly focused on unwinding current cuts and getting back to normal production,” said SEB chief commodity analyst Bjarne Schieldrop.

Continue Reading

Crude Oil

Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

Published

on

oil

Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

Oil prices rose to $65.47 per barrel on Thursday as crude oil production dropped in the US due to frigid Texas weather.

The unusual weather has left millions in the dark and forced oil producers to shut down production. According to reports, at least the winter blast has claimed 24 lives.

Brent crude oil gained $2 to $65.47 on Thursday morning before pulling back to $64.62 per barrel around 11:00 am Nigerian time.

U.S. West Texas Intermediate (WTI) crude rose 2.3 percent to settle at $61.74 per barrel.

“This has just sent us to the next level,” said Bob Yawger, director of energy futures at Mizuho in New York. “Crude oil WTI will probably max out somewhere pretty close to $65.65, refinery utilization rate will probably slide to somewhere around 76%,” Yawger said.

However, the report that Saudi Arabia plans to increase production in the coming months weighed on crude oil as it can be seen in the chart below.

Prince Abdulaziz bin Salman, Saudi Arabian Energy Minister, warned that it was too early to declare victory against the COVID-19 virus and that oil producers must remain “extremely cautious”.

“We are in a much better place than we were a year ago, but I must warn, once again, against complacency. The uncertainty is very high, and we have to be extremely cautious,” he told an energy industry event.

Continue Reading

Trending