Balancing the oil market could be jeopardized by shale

Updated 23 August 2017
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Balancing the oil market could be jeopardized by shale

JEDDAH: The Organization of the Petroleum Exporting Countries’ (OPEC) job to restore the balance of the oil market just got harder as more output is expected to come from shale oil producers in North America with oil prices settling now at around $50.
OPEC is not sure that the market will rebalance this year if more production from shale oil producers can offset the group’s efforts to bring down global inventories, an OPEC source told Arab News.
The source said that there are risks to the deal from supply from other OPEC members such as Libya and Nigeria that are exempted from the production cut targets, due to their security issues and unstable production situation.
OPEC is now trying to conduct more studies on the impact of shale oil in the market and the findings of these studies will be presented to the ministers of the committee that monitors the agreement to cut production in their next meeting, the source, who asked not to be named because he is not authorized to speak to media, added.
The committee known as the Joint Ministerial Monitoring Committee, or JMMC, will probably convene in Vienna next month to review market developments since the last meeting in Russia in July, the source said. Shale crude oil production from seven major US oil plays is expected to reach a record in September. The US Energy Information Administration (EIA) said on Aug. 14 in its monthly drilling productivity report that it expects shale oil production to climb by 117,000 barrels per day (bpd) in September.
The EIA said last week that US production in the week ending Aug. 11 hit 9.5 million bpd, a level not seen since 2015, according to Bloomberg’s estimates. “$50 a barrel is still a pretty critical number and that number is going to be even more critical as we move into next year,” Tortoise Capital Advisors’ Rob Thummel told Bloomberg on Aug. 2.
Some analysts, however, expect shale oil production not to grow by as much as many in the industry believe that the cost of production for shale is also increasing. Standard Chartered’s analyst Steve Brice told Bloomberg TV on Aug. 22 that shale oil will stabilize this year at current levels unless oil prices increased from current levels.


Merkel seeks united front with China amid Trump trade fears

Updated 22 May 2018
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Merkel seeks united front with China amid Trump trade fears

  • Merkel seeks common ground to ward off trade war
  • Plans complicated by US policy moves

Chancellor Angela Merkel visits China on Thursday, seeking to close ranks with the world’s biggest exporting nation as US President Donald Trump shakes up explosive issues from trade to Iran’s nuclear deal.

Finding a common strategy to ward off a trade war and keep markets open will be Merkel’s priority when she meets with President Xi Jinping, as Washington brandishes the threat of imposing punitive tariffs on aluminum and steel imports.

“Both countries are in agreement that open markets and rules-based world trade are necessary. That’s the main focus of this trip,” Merkel’s spokeswoman Martina Fietz said in Berlin on Friday.

But closing ranks with Beijing against Washington risks being complicated by Saturday’s deal between China and the US to hold off tit-for-tat trade measures.

China’s economic health can only benefit Germany as the Asian giant is a big buyer of Made in Germany. But a deal between the US and China effectively leaves Berlin as the main target of Trump’s campaign against foreign imports that he claims harm US national security.

The US leader had already singled Germany out for criticism, saying it had “taken advantage” of the US by spending less than Washington on NATO.

Underlining what is at stake, French Economy Minister Bruno Le Maire warned the US-China deal may come “at the expense of Europe if Europe is not capable of showing a firm hand.”

Nevertheless, Merkel can look to her carefully nurtured relationship with China over her 12 years as chancellor.

No Western leader has visited Beijing as often as Merkel, who will be undertaking her eleventh trip to the country.

In China, she is viewed not only as the main point of contact for Europe, but, crucially, also as a reliable interlocutor — an antithesis of the mercurial Trump.

Devoting her weekly podcast to her visit, Merkel stressed that Beijing and Berlin “are both committed to the rules of the WTO” (World Trade Organization) and want to “strengthen multilateralism.”

But she also underlined that she will press home Germany’s longstanding quest for reciprocity in market access as well as the respect of intellectual property.

Ahead of her visit, Beijing fired off a rare salvo of criticism.

China’s envoy to Germany, Shi Mingde, pointed to a “protectionist trend in Germany,” as he complained about toughened rules protecting German companies from foreign takeovers.

Only 0.3 percent of foreign investors in Germany stem from China while German firms have put in €80 billion in the Asian giant over the last three decades, he told Stuttgarter Nachrichten.

“Economic exchange cannot work as a one-way street,” he warned.

Meanwhile, looming over the battle on the trade front is another equally thorny issue — the historic Iran nuclear deal, which risks falling apart after Trump pulled the US out.

Tehran has demanded that Europe keeps the deal going by continuing economic cooperation, but the US has warned European firms of sanctions if they fail to pull out of Iran.

Merkel “hopes that China can help save the atomic deal that the US has unilaterally ditched,” said Die Welt daily.

“Because only the giant emerging economy can buy enough raw materials from Iran to give the Mullah regime an incentive to at least officially continue to not build a nuclear weapon.”