Oil posts strongest year opening since 2014; Iran unrest pushes up crude

In this Saturday, Dec. 30, 2017 file photo a university student attends a protest inside Tehran University while a smoke grenade is thrown by anti-riot Iranian police, in Tehran, Iran. (AP)
Updated 02 January 2018
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Oil posts strongest year opening since 2014; Iran unrest pushes up crude

SINGAPORE: Oil prices posted their strongest opening to a year since 2014 on Tuesday, with crude rising to mid-2015 highs amid large anti-government rallies in Iran and ongoing supply cuts led by OPEC and Russia.
US West Texas Intermediate (WTI) crude futures were at $60.61 a barrel at 0423 GMT, up 19 cents, or 0.3 percent, after hitting $60.73 earlier in the day, ther highest since June 2015.
Brent crude futures, the international benchmark, were at $67.12 a barrel, up 25 cents, or 0.4 percent, after hitting a May 2015 high of $67.27 a barrel earlier in the day.
It was the first time since January 2014 that the two crude oil benchmarks opened the year above $60 per barrel.
“Growing unrest in Iran set the table for a bullish start to 2018,” the US-based Schork Report said in a note to clients on Tuesday.
Anti-government protesters demonstrated in Iran on Sunday in defiance of a warning by authorities of a crackdown, extending for a fourth day one of the most audacious challenges to the clerical leadership since pro-reform unrest in 2009.
Even without the unrest in Iran, which is a major oil exporter, market sentiment was bullish.
“Falling inventories globally and strong economic growth offset the restart of the Forties pipeline and the resumption of production following a pipeline outage in Libya,” said Jeffrey Halley, senior market analyst at futures brokerage Oanda in Singapore.
The 450,000 barrels per day (bpd) capacity Forties pipeline system in the North Sea returned to full operations on Dec. 30 after an unplanned shutdown.
Oil markets have been supported by a year of production cuts led by the Middle East-dominated Organization of the Petroleum Exporting Countries (OPEC) and Russia. The cuts started in January 2017 and are scheduled to cover all of 2018.
US commercial crude oil inventories have fallen by almost 20 percent from their historic highs last March, to 431.9 million barrels.
Strong demand growth, especially from China, has also been supporting crude.
“We would not be surprised to see a further (oil price) rise,” said Sukrit Vijayakar, director of energy consultancy Trifecta.
Only rising US production, which is on the verge of breaking through 10 million bpd, is somewhat hampering the outlook into 2018.
“The higher prices are expected to stoke US shale output,” O’Loughlin said.
US oil production has risen by almost 16 percent since mid-2016, to 9.75 million bpd at the end of last year.
However, consultancy Rystad Energy said “US crude oil production capacity has reached 10 million barrels per day.”


Mideast plays key role in Chinese export of armed drones, report says

Updated 17 December 2018
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Mideast plays key role in Chinese export of armed drones, report says

  • China has exploited America’s selective drone export policy to become an increasingly influential player in meeting demand
  • The report is entitled “Armed Drones in the Middle East: Proliferation and Norms in the Region”

BEIRUT: The use of armed drones in the Middle East, driven largely by sales from China, has grown significantly in the past few years with an increasing number of countries and other parties using them in regional conflicts to lethal effects, a new report said Monday.
The report by the Royal United Services Institute, or RUSI, found that more and more Mideast countries have acquired armed drones, either by importing them, such as Jordan, Iraq, Saudi Arabia and the United Arab Emirates, or by building them domestically like Israel, Iran and Turkey.
China has won sales in the Middle East and elsewhere by offering drones — otherwise known as UAVs or unmanned aerial vehicles — at lower prices and without the political conditions attached by the United States.
The report , entitled “Armed Drones in the Middle East: Proliferation and Norms in the Region,” said that by capitalizing on the gap in the market over the past few years, Beijing has supplied armed drones to several countries that are not authorized to purchase them from the US, and at a dramatically cheaper price.
“China, a no-questions-asked exporter of drones, has played and is likely to continue playing a key role as a supplier of armed UAVs to the Middle East,” it said.
The report explored where and how each of the states have used their armed drones and whether they have changed the way these countries approach air power. It found that Iran, the UAE and Turkey all changed the way they employ airpower after they acquired armed drones.
For Turkey and the UAE, armed drones enabled them to conduct strikes in situations where they would not have risked using conventional aircraft, it said. Iran developed armed drones from the outset specifically to enable to project power beyond the reach of its air force, which is hamstrung by obsolete aircraft and sanctions, the report added.
The report said it remains to be seen whether and how the loosening of restrictions on the exportation of armed drones by the Trump administration will alter dynamics in the region.
“Nonetheless, proliferation in armed UAVs in the Middle East is unlikely to stop and could, in fact, even accelerate,” the report said.