World oil supply risks being ‘stretched to limit’ — energy watchdog

Already in June the two key producers lifted output by more than 500,000 barrels per day between them, the International Energy Agency said on Thursday. (Reuters)
Updated 12 July 2018
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World oil supply risks being ‘stretched to limit’ — energy watchdog

  • The International Energy Agency pointed to supply disruptions in Libya after a string of attacks on infrastructure
  • Saudi Arabia and Russia opened their taps ahead of a key Vienna meeting in June where OPEC and Moscow agreed to up output in order to bring prices down

PARIS: Rising global oil supply, driven by crude giants Saudi Arabia and Russia, may come under pressure as key producers face disruptions, the International Energy Agency said Thursday.
The IEA welcomed in its July report last month’s agreement between the Organization of the Petroleum Exporting Countries (OPEC) and Russia to open the taps in order to bring prices down from multi-year highs.
But it pointed to supply disruptions in Libya after a string of attacks on infrastructure.
It also highlighted continuing unrest in Venezuela and a drop in Iranian exports after President Donald Trump announced he was pulling the United States out of the landmark nuclear deal reached in 2015.
“The large number of disruptions reminds us of the pressure on global oil supply,” the IEA said.
“This will become an even bigger issue as rising production from Middle East Gulf countries and Russia, welcome though it is, comes at the expense of the world’s spare capacity cushion, which might be stretched to the limit.”
The IEA report was published a day after both main oil contracts were sent into freefall by worries over a stronger dollar and the impact of the global trade war on demand.
The selling was also fanned by Libya’s resumption Wednesday of oil exports from its eastern production heartland after a showdown between the war-torn country’s rival authorities.
Even though Libyan exports have resumed, the IEA remains worried for the future.
“At the time of writing, the situation seemed to be improving, but we cannot know if stability will return,” it said.
“The fact that so much production is vulnerable is clearly a cause for concern.”
Also worrisome was the unabating unrest in Venezuela, which has sent output from the Latin American oil giant crashing in recent weeks.
And while Iran has yet to feel the full impact of renewed US sanctions, the IEA fears there could be “an even steeper reduction than the 1.2 million barrels per day seen during the previous round of sanctions.”
Iraq, which is also chronically restive, does not have spare capacity either, leaving most of the job of hiking OPEC production to Saudi Arabia, the United Arab Emirates and Kuwait.
“We see no sign of higher production from elsewhere that might ease fears of market tightness,” the IEA said.
Saudi Arabia and Russia opened their taps ahead of a key Vienna meeting in June where OPEC and Moscow agreed to up output in order to bring prices down.
“Already in June the two key producers lifted output by more than 500,000 barrels per day between them,” the IEA said.
“Saudi Arabia’s sharp increase allowed it to overtake the US and reclaim its position as the world’s second largest crude producer, and if it carries out its intention to produce at a record rate near 11 million barrels per day this month, it will challenge Russia,” it added.
But they alone cannot carry the burden of keeping the oil market stable.
“Despite higher output in June, OPEC oil supply was down 700,000 barrels per day compared to a year ago, with Venezuela lower by nearly 800,000 barrels per day, Angola by 210,000 barrels per day and Libya by 130,000 barrels per day,” the IEA said.
“Even so, global oil output was 1.25 million barrels per day higher than a year ago as rampant US output underpinned healthy non-OPEC growth.”


Apple Watch, FitBit could feel cost of US tariffs

Updated 20 July 2018
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Apple Watch, FitBit could feel cost of US tariffs

SAN FRANCISCO: The latest round of US tariffs on $200 billion of Chinese goods could hit the Apple Watch, health trackers, streaming music speakers and other accessories assembled in China, government rulings on tariffs show.
The rulings name Apple Inc’s watch, several Fitbit Inc. activity trackers and connected speakers from Sonos Inc. While consumer technology’s biggest sellers such as mobile phones and laptops so far have faced little danger of import duties, the rulings show that gadget makers are unlikely to be spared altogether and may have to consider price hikes on products that millions of consumers use every day.
The devices have all been determined by US Customs and Border Patrol officials to fall under an obscure subheading of data transmission machines in the sprawling list of US tariff codes. And that particular subheading is included in the more than 6,000 such codes in President Donald Trump’s most recent round of proposed tariffs released earlier this month.
That $200 billion list of tariffs is in a public comment period. But if the list goes into effect this fall, the products from Apple, Fitbit and Sonos could face a 10 percent tariff.
The specific products listed in customs rulings are the original Apple Watch; Fitbit’s Charge, Charge HR and Surge models; and Sonos’s Play:3, Play:5 and SUB speakers.
All three companies declined to comment on the proposed tariff list. But in its filing earlier this month to become a publicly traded company, Sonos said that “the imposition of tariffs and other trade barriers, as well as retaliatory trade measures, could require us to raise the prices of our products and harm our sales.”
The New York Times has reported that Trump told Apple CEO Tim Cook during a meeting in May that the US government would not levy tariffs on iPhones assembled in China, citing a person familiar with the meeting.
“The way the president has been using his trade authority, you have direct examples of him using his authority to target specific products and companies,” said Sage Chandler, vice president for international trade policy at the Consumer Technology Association.
The toll from tariffs on the gadget world’s smaller product lines could be significant. Sonos and Fitbit do not break out individual product sales, but collectively they had $2.6 billion in revenue last year. Bernstein analyst Toni Sacconaghi estimates that the Apple Watch alone will bring in $9.9 billion in sales this year, though that estimate includes sales outside the United States that the tariff would not touch.
It is possible that the products from Apple, Fitbit and Sonos no longer fall under tariff codes in the $200 billion list, trade experts said. The codes applied to specific products are only public knowledge because their makers asked regulators to rule on their proper classification. And some of the products have been replaced by newer models that could be classified differently.
But if companies have products whose tariff codes are on the list, they have three options, experts said: Advocate to get the code dropped from the list during the public comment period, apply for an exclusion once tariffs go into effect, or try to have their products classified under a different code not on the list.
The last option could prove difficult due to the thousands of codes covered, said one former US trade official.