OPEC moves toward raising oil supply as Iran softens stance

Iranian Oil Minister Bijan Zanganeh, above, has said that if OPEC returned to regular compliance, the group would raise output by around 460,000 barrels per day. (Reuters)
Updated 22 June 2018
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OPEC moves toward raising oil supply as Iran softens stance

  • Iran, OPEC’s third-largest producer, has so far been the main barrier to a deal as it called on OPEC to reject pressure from US President Donald Trump to pump more oil
  • OPEC and its allies have since last year been participating in a pact to cut output by 1.8 million bpd

VIENNA: OPEC moved closer on Friday toward boosting oil output as its leader Saudi Arabia appeared to have persuaded arch-rival Iran to cooperate, after major consumers warned of a supply shortage.

Saudi Arabia and non-OPEC Russia have said a production increase of about 1 million barrels per day (bpd) or around 1 percent of global supply had become a near-consensus proposal for the group and its allies.

The Organization of the Petroleum Exporting Countries is gathering in Vienna amid calls from the United States, China and India to cool down the price of crude and prevent an oil deficit that would hurt the global economy.

OPEC in theory needs the agreement of all members to clinch a deal but has in the past agreed production pacts without Iran, which has criticized the idea of raising supply as it faces export-crippling US sanctions.

“We are cooking something,” Iranian Oil Minister Bijan Zanganeh told reporters after meeting Saudi Energy Minister Khalid Al-Falih before the OPEC talks.

Iran, OPEC’s third-largest producer, has so far been the main barrier to a deal as it called on OPEC to reject pressure from US President Donald Trump to pump more oil.

Trump imposed fresh sanctions on Tehran in May and market watchers expect Iran’s output to drop by a third by the end of 2018. That means the country has little to gain from a deal to raise OPEC output, unlike top oil exporter Saudi Arabia.

Falih said the overwhelming majority of producers had recommended raising output by 1 million bpd, gradually and on a pro-rata basis.

OPEC and its allies have since last year been participating in a pact to cut output by 1.8 million bpd. The measure has helped rebalance the market in the past 18 months and lifted oil to around $74 per barrel from as low as $27 in 2016.

But unexpected outages in Venezuela, Libya and Angola have effectively brought supply cuts to around 2.8 million bpd in recent months.

Brent oil prices were up 1.8 percent on Friday.

OPEC has a history of difficult meetings as well as clashes between Iran and Saudi Arabia.

In 2000, then-US President Bill Clinton’s energy secretary, Bill Richardson, phoned Ali Al-Naimi, the Saudi oil minister at the time, during an OPEC meeting to ask for more oil.

The move infuriated Iran, and Zanganeh refused to sign up to the meeting’s decision to raise output. The dispute was settled by the time of the next OPEC talks.

The current standoff was partially triggered by the United States, with Trump calling directly on OPEC to raise output.

Falih has warned the world could face a supply deficit of up to 1.8 million bpd in the second half of 2018 and that OPEC’s responsibility was to address consumers’ worries.

“We want to prevent the shortage and the squeeze that we saw in 2007-2008,” Falih said, referring to a time when oil rallied close to $150 per barrel.

Earlier this week, Zanganeh left the door open for a deal, saying OPEC members that had overdelivered on cuts in recent months should comply with agreed quotas. That would effectively mean a modest boost from producers such as Saudi Arabia that have voluntarily cut more deeply than planned.

Zanganeh has said that if OPEC returned to regular compliance, the group would raise output by around 460,000 bpd.

On Friday, Zanganeh said OPEC would change the structure of the current deal, but declined to elaborate.

Falih also said the real increase would be smaller than the nominal gain of 1 million bpd, meaning a compromise with Iran remained possible. He said OPEC could meet again in September to adjust the deal.

OPEC sources also said Iran had demanded that US sanctions be mentioned in the group’s post-meeting communique, as Tehran has blamed US measures for the recent rise in oil prices.

The United States, which rivals Russia and Saudi Arabia for the position of world No.1 oil producer, is not participating in the current supply pact.


Porsche first German carmaker to abandon diesel engines

Updated 23 September 2018
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Porsche first German carmaker to abandon diesel engines

  • The company would concentrate on its core strength, ‘powerful petrol, hybrid and, from 2019, purely electric vehicles’
  • But Porsche promised it would keep servicing diesel models on the road now

BERLIN: Sports car maker Porsche said Sunday it would become the first German auto giant to abandon the diesel engine, reacting to parent company Volkswagen’s emissions cheating scandal and resulting urban driving bans.
“There won’t be any Porsche diesels in the future,” CEO Oliver Blume told the newspaper Bild am Sonntag.
Instead, the company would concentrate on what he called its core strength, “powerful petrol, hybrid and, from 2019, purely electric vehicles.”
The Porsche chief conceded the step was a result of the three-year-old “dieselgate” scandal at auto giant Volkswagen, the group to which the luxury sports car brand belongs.
VW in 2015 admitted to US regulators to having installed so-called “defeat devices” in 11 million cars worldwide to dupe emissions tests.
It has so far paid out more than €27 billion in fines, vehicle buybacks, recalls and legal costs and remains mired in legal woes at home and abroad.
Diesel car sales have dropped sharply as several German cities have banned them to bring down air pollution — a trend that Chancellor Angela Merkel was due to discuss with car company chiefs in Berlin later Sunday.
Stuttgart-based Porsche in February stopped taking orders for diesel models, which it had sold for nearly a decade.
Blume said Porsche had “never developed and produced diesel engines,” having used Audi motors, yet the image of the brand had suffered.
“The diesel crisis has caused us a lot of trouble,” he said, months after Germany’s Federal Transport Authority ordered the recall of nearly 60,000 Porsche SUVs in Europe.
Blume promised that the company would keep servicing diesel models on the road now.
According to the paper, Porsche also faces claims of having manipulated engines to produce a more powerful sound with a technique that was deactivated during testing.
Blume acknowledged that German regulators had found irregularities in the 8-cylinder Cayenne EU5, affecting some 13,500 units.
Merkel, Transport Minister Andreas Scheuer and heads of German auto companies were due to meet in Berlin later Sunday to discuss steps to avoid more city driving bans.
The German government hopes to see one million fully electric and hybrid vehicles on the road by 2022, up from fewer than 100,000 at the start of this year.