Iran and Venezuela weighing on oil market, energy watchdog says

People walk by a small square with an oil pump in one of the access roads to the Central University of Venezuela, in Caracas. (AFP)
Updated 16 May 2018
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Iran and Venezuela weighing on oil market, energy watchdog says

PARIS: Global oil supplies could be hit by the decision by the US to pull out of the Iran nuclear deal, and also by falling production in crisis-hit Venezuela, the IEA said on Wednesday.
The decision by US President Donald Trump to withdraw from the Iran deal “has switched the focus of oil market analysis from the fundamentals to geopolitics,” the International Energy Agency wrote in its regular monthly report.
On May 8, Trump announced he would pull the US out of a 2015 pact — agreed by Britain, China, Germany, Russia and the Barack Obama administration — that opened up Tehran’s atomic program in return for an easing of sanctions.
Oil prices — which had already rising on the back of steady demand growth and a landmark deal by oil producing countries, both inside and outside OPEC, to lower output — have since surged above $77 per barrel, the IEA said.
“In these early days, there is understandable uncertainty about (the) potential impact on Iran’s oil exports” from the US move, it said.
When sanctions were imposed in 2012, Iranian exports fell by about 1.2 million barrels per day, the organization said.
“It is too soon to say what will happen this time, but we should examine whether other producers could step in to ensure an orderly flow of oil to the market and offset a disruption to Iranian exports.”
Shortly after the US announcement, Saudi Arabia, the OPEC kingpin, acknowledged the need to work with producers and consumers to mitigate possible supply shortfalls, the IEA noted.
Another possible risk to the global oil supply could come from crisis-hit Venezuela, the IEA said.
“In Venezuela, the pace of decline of oil production is accelerating and by the end of this year output could have fallen by several hundred thousand barrels a day,” the IEA said.
“The potential double supply shortfall represented by Iran and Venezuela could present a major challenge for producers to fend off sharp price rises and fill the gap, not just in terms of the number of barrels but also in terms of oil quality,” it said.
The IEA said that the overall market balance was “continuing to tighten,” and it lowered its estimate for 2018 global oil demand growth to 1.4 million barrels per day from its previous estimate of 1.5 million.
“Demand at the start of the year was supported by cold weather in Europe and the US, the start-up of new petrochemical capacity in the US and a solid economic background,” the IEA said.
“While the economic environment will continue to support oil demand... support from harsh weather conditions will vanish and the recent jump in oil prices will take its toll,” it said.
“Therefore, world oil demand growth is expected to slow” in the second half of the year.


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.”