- OPEC Not a Cartel, Doesn’t Fix Oil Prices, Says Barkindo
The Secretary-General of the Organisation of Petroleum Exporting Countries (OPEC), Dr. Mohammad Barkindo, has said the exporting group is not in the business of fixing oil prices.
This is coming as the group and its allies such as Russia have set up a new alliance but decided against creating a formal body to avoid falling victims to the United States anti-cartel legislation.
A committee of the United States House of Representatives had last Thursday approved an anti-cartel legislation, known as the ‘No Oil Producing and Exporting Cartels Act’, or NOPEC, that would open up the members of OPEC to antitrust lawsuits.
Reacting to this legislation, Barkindo told Reuters yesterday that: “OPEC is neither a cartel nor involved in the business of fixing oil prices.”
“It would be a misjudgment to accuse us of such,” he said on the sidelines of an energy forum in Cairo, Egypt.
“OPEC is an open, transparent organisation focused on assisting the oil markets to remain in balance on a sustainable basis, which is a fundamental requirement of investors,” Barkindo said.
“The international oil industry needs market stability to plan and invest in a predictable manner in order to guarantee future supplies,” he added.
OPEC and a group of non-OPEC countries including Russia, an alliance known as OPEC and its allies, are reducing oil output in 2019 to avoid a potential supply glut that could weigh on prices. A similar action in 2017 got rid of an earlier supply glut.
OPEC, Russia Draft Cooperation Charter
Apparently scared by the United States anti-cartel legislation for the oil industry, OPEC and its allies such as Russia have drafted a new cooperation charter but decided against creating a formal body, at least on paper.
A draft of a document – setting up a new alliance and dated January 2019 – and seen by Reuters carefully avoids any mention of sensitive issues such as oil prices, market share and production cuts.
OPEC and Russia have been cutting production together to support prices since 2017, after clinching a deal in December 2016, in moves that have provoked criticism from United States President Donald Trump.
The new draft said OPEC and Russia will discuss creating “a mechanism” rather than “an organisation” when they meet in April 17-18 in Vienna, calling for the creation of an “Alliance of Oil Producing Countries”.
“It looks genuine. It’s also been updated since,” an OPEC source said without giving any further details.
The objectives of the alliance are listed as setting up “an intergovernmental platform to facilitate dialogue” and “further strengthen the collaboration in the formulation of policies aimed at promoting oil market stability”.
The objectives are due to be achieved by promoting a better understanding among its members of energy market fundamentals as well as “permanent dialogue among oil producing countries”, according to the document.
Russia is not an OPEC member and has said it does not intend to join the organisation on a permanent basis.
OPEC and Russia jointly produce more than 40 per cent of the world’s oil.
The idea of an organisation of OPEC and non-OPEC countries has been mooted since joint efforts to stabilise oil prices have come to fruition.
Russian Energy Minister Alexander Novak said in December 2018 a joint OPEC and non-OPEC structure seemed unlikely due to the additional red tape it would create as well as the risk of U.S. monopoly-related sanctions.
The draft document also foresees ministerial meetings twice a year and regular encounters of technical experts.
Brent Crude Oil Approaches $70 Per Barrel on Friday
Nigerian Oil Approaches $70 Per Barrel Following OPEC+ Production Cuts Extension
Brent crude oil, against which Nigerian oil is priced, rose to $69 on Friday at 3:55 pm Nigerian time.
Oil price jumped after OPEC and allies, known as OPEC plus, agreed to role-over crude oil production cuts to further reduce global oil supplies and artificially sustain oil price in a move experts said could stoke inflationary pressure.
Brent crude oil rose from $63.86 per barrel on Wednesday to $69 per barrel on Friday as energy investors became more optimistic about the oil outlook.
While certain experts are worried that U.S crude oil production will eventually hurt OPEC strategy once the economy fully opens, few experts are saying production in the world’s largest economy won’t hit pre-pandemic highs.
According to Vicki Hollub, the CEO of Occidental, U.S oil production may not return to pre-pandemic levels given a shift in corporates’ value.
“I do believe that most companies have committed to value growth, rather than production growth,” she said during a CNBC Evolve conversation with Brian Sullivan. “And so I do believe that that’s going to be part of the reason that oil production in the United States does not get back to 13 million barrels a day.”
Hollub believes corporate organisations will focus on optimizing present operations and facilities, rather than seeking growth at all costs. She, however, noted that oil prices rebounded faster than expected, largely due to China, India and United States’ growing consumption.
“The recovery looks more V-shaped than we had originally thought it would be,” she said. Occidental previous projection had oil production recovering to pre-pandemic levels by the middle of 2022. The CEO Now believes demand will return by the end of this year or the first few months of 2022.
“I do believe we’re headed for a much healthier supply and demand environment” she said.
Oil Jumps to $67.70 as OPEC+ Extends Production Cuts
Oil Jumps to $67.70 as OPEC+ Extends Production Cuts
Brent crude oil, against which Nigerian oil is priced, rose to $67.70 per barrel on Thursday following the decision of OPEC and allies, known as OPEC+, to extend production cuts.
OPEC and allies are presently debating whether to restore as much as 1.5 million barrels per day of crude oil in April, according to people with the knowledge of the meeting.
Experts have said OPEC+ continuous production cuts could increase global inflationary pressure with the rising price of could oil. However, Saudi Energy Minister Prince Abdulaziz bin Salman said “I don’t think it will overheat.”
Last year “we suffered alone, we as OPEC+” and now “it’s about being vigilant and being careful,” he said.
Saudi minister added that the additional 1 million barrel-a-day voluntary production cut the kingdom introduced in February was now open-ended. Meaning, OPEC+ will be withholding 7 million barrels a day or 7 percent of global demand from the market– even as fuel consumption recovers in many nations.
Experts have started predicting $75 a barrel by April.
“We expect oil prices to rise toward $70 to $75 a barrel during April,” said Ann-Louise Hittle, vice president of macro oils at consultant Wood Mackenzie Ltd. “The risk is these higher prices will dampen the tentative global recovery. But the Saudi energy minister is adamant OPEC+ must watch for concrete signs of a demand rise before he moves on production.”
Gold Hits Eight-Month Low as Global Optimism Grows Amid Rising Demand for Bitcoin
Gold Struggles Ahead of Economic Recovery as Bitcoin, New Gold, Surges
Global haven asset, gold, declined to the lowest in more than eight months on Tuesday as signs of global economic recovery became glaring with rising bond yields.
The price of the precious metal declined to $1,718 per ounce during London trading on Thursday, down from $2,072 it traded in August as more investors continue to cut down on their holdings of the metal.
The previous metal usually performs poorly with rising yields on other assets like bonds, especially given the fact that gold does not provide streams of interest payments. Investors have been jumping on US bonds ahead of President Joe Biden’s $1.9 trillion coronavirus stimulus package, expected to stoke stronger US price growth.
“We see the rising bond yields as a sign of economic optimism, which has also prompted gold investors to sell some of their positions,” said Carsten Menke of Julius Baer.
Another analyst from Commerzbank, Carsten Fritsch, said that “gold’s reputation appears to have been tarnished considerably by the heavy losses of recent weeks, as evidenced by the ongoing outflows from gold ETFs”.
Experts at Investors King believed the growing demand for Bitcoin, now called the new gold, and other cryptocurrencies in recent months by institutional investors is hurting gold attractiveness.
In a recent report, analysts at Citigroup have started projecting mainstream acceptance for the unregulated dominant cryptocurrency, Bitcoin.
The price of Bitcoin has rallied by 60 percent to $52,000 this year alone. While Ethereum has risen by over 660 percent in 2021.
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