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OPEC Not a Cartel, Doesn’t Fix Oil Prices, Says Barkindo

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OPEC
  • 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.

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.

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Oil Holds Near Highest Since 2018 With Global Markets Tightening

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Crude Oil - Investors King

Oil held steady near the highest close since 2018, with the global energy crunch set to increase demand for crude as stockpiles fall from the U.S. to China.

Futures in London headed for a third weekly gain. Global onshore crude stocks sank by almost 21 million barrels last week, led by China, according to data analytics firm Kayrros, while U.S. inventories are near a three-year low. The surge in natural gas prices is expected to force some consumers to switch to oil, tightening the market further ahead of the northern hemisphere winter.

China on Friday sold oil to Hengli Petrochemical Co. and a unit of PetroChina Co. in the first auction of crude from its strategic reserves said traders with the knowledge of the matter. Grades sold included Oman, Upper Zakum and Forties.

Oil has rallied recently after a period of Covid-induced demand uncertainty, with some of the world’s largest traders and banks predicting prices may climb further amid the energy crisis. Global crude consumption could rise by an additional 370,000 barrels a day if natural gas costs stay high, according to the Organization of Petroleum Exporting Countries.

“Underpinning the latest bout of price strength is a tightening supply backdrop,” said Stephen Brennock, an analyst at PVM Oil Associates Ltd.

Various underlying oil market gauges are also pointing to a strengthening market. The key spread between Brent futures for December and a year later is near $7, the strongest since 2019. That’s a sign traders are positive about the market outlook.

At the same time, the premium options traders are paying for bearish put options is the smallest since January 2020, another indication that traders are less concerned about a pullback in prices.

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Energy

Unlocking Investments into Africa’s Renewable Energy Market

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green energy - Investors King

The African Energy Guarantee Facility (AEGF) is launching a virtual roadshow of free webinars allowing a deeper understanding of risk issues for renewable energy projects on the continent, and conversations around risk mitigation solutions. The first webinar will take place on Thursday, 23 September from 14:30-16:00 hrs. EAT. 

The session will be oriented on how to get more energy projects from the drawing board to the grid. While the energy demand in African economies is expected to nearly double by 2040, and although the potential for renewable energy is 1,000 times larger than the demand, only 2GW out of almost 180GW of this new renewable power were added on the African continent.

Clearly not good enough! To improve the situation within the next two decades, new solutions need to be implemented urgently. De-risking and promoting private sector investments will play a crucial part of it.

In this 90-min interactive session, AEGF partners: the European Investment Bank (EIB), KfW Development Bank, Munich Re and the African Trade Insurance Agency (ATI) will share their experience and provide valuable insights on how they were able to come together and design practical solutions for investors and financiers of green energy projects in Africa aligned with SDG7 objectives.

Across Africa, the complexity of renewable energy projects and their long tenors hold back crucial energy investment. Tailored to the specific needs and risk profiles of sustain­able energy projects, AEGF will tackle the investment challenge by providing underwriting expertise and capacity tailored to market needs.

The AEGF will significantly boost private investment in sustainable energy projects, both expanding access to clean energy and contribute to achieving UN Sustainable Development Goals. The scheme supports new private sector investment in eligible renewable energy, energy efficiency and energy access projects in sub-Saharan Africa.

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Energy

Shell Signs Agreement To Sell Permian Interest For $9.5B to ConocoPhillips

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Shell profit drops 44 percent

Shell Enterprises LLC, a subsidiary of Royal Dutch Shell plc, has reached an agreement for the sale of its Permian business to ConocoPhillips, a leading shales developer in the basin, for $9.5 billion in cash. The transaction will transfer all of Shell’s interest in the Permian to ConocoPhillips, subject to regulatory approvals.

“After reviewing multiple strategies and portfolio options for our Permian assets, this transaction with ConocoPhillips emerged as a very compelling value proposition,” said Wael Sawan, Upstream Director. “This decision once again reflects our focus on value over volumes as well as disciplined stewardship of capital. This transaction, made possible by the Permian team’s outstanding operational performance, provides excellent value to our shareholders through accelerating cash delivery and additional distributions.”

Shell’s Upstream business plays a critical role in the Powering Progress strategy through a more focused, competitive and resilient portfolio that provides the energy the world needs today whilst funding shareholder distributions as well as the energy transition.

The cash proceeds from this transaction will be used to fund $7 billion in additional shareholder distributions after closing, with the remainder used for further strengthening of the balance sheet. These distributions will be in addition to our shareholder distributions in the range of 20-30 percent of cash flow from operations. The effective date of the transaction is July 1, 2021 with closing expected in Q4 2021.

Shell has been providing energy to U.S. customers for more than 100 years and plans to remain an energy leader in the country for decades to come.

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