Oil rises on Iran sanctions and lower US stockpiles

An oil well pump jack is seen at an oil field supply yard near Denver, Colorado, U.S., February 2, 2015. (Reuters)
Updated 30 August 2018
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Oil rises on Iran sanctions and lower US stockpiles

LONDON: Oil prices extended gains yesterday as the market considered the impact of reduced Iranian exports and a fall in
US stockpiles.

Brent crude gained more than 50 cents a barrel at $77.64 by midday in London, taking its weekly gain to almost 10 percent.

US light crude was 40 cents higher at about $69.91.

“The oil market is once again tightening after a short period in late June and early July when it was likely oversupplied,” said Giovanni Staunovo, an analyst at UBS Group AG in Zurich. “Iranian oil export declines are already visible well in advance of US oil-related sanctions.”

Most of Iran’s customers are already facing difficulties in buying the country’s crude even before sanctions are imposed on Nov. 4, Bloomberg reported on Thursday.

India and China’s combined purchases of Iranian oil could drop about 23 percent to almost 1 million barrels a day amid the US restrictions, ESAI Energy said. 

OPEC is set to discuss the impact of the decline in Iranian crude on global energy markets when it meets in December — more than a month after the oil sanctions come into effect.

“A sudden drop in Iranian crude shipments from the market will cause big shortages and a negative impact on oil prices,” he said, referring to a possible increase in prices,” Alaa Al-Yasiri the head of Iraq’s state-oil marketer SOMO, told Reuters on Wednesday. “It’s very difficult to predict what’s going to happen in next OPEC meeting but producers must find ways to make up for Iranian crude that the market will lose. The major issue during the next OPEC meeting will be are producers really ready to pump more oil to compensate Iran’s share?”

Ongoing concerns over supplies from Venezuela as well as declining US oil inventories have stengthened claims that the global oil market is tightening once again.

US commercial crude inventories fell by 2.6 million barrels in the week to Aug. 24, to 405.79 million barrels, the Energy Information Administration said on Wednesday. That was more than forecast.

Still, current US sanctions on Iran are unlikely to stop Iranian oil exports completely, a long-time adviser at Saudi Arabia’s Energy Ministry said on Tuesday, adding Iran would be unable to close the straits of Hormuz and Bab Al-Mandab even partially.

Speaking at an oil conference in the Norwegian city of Stavanger, Ibrahim Al-Muhanna said that Iran would be the first to lose out from any move to block those major shipping routes and that any such action would trigger further sanctions on Iran.

Iran has said if it cannot sell its oil due to US pressure, then no other regional country will be allowed to do so either, threatening to block the Strait of Hormuz.

“The amount of oil going through the Strait of Hormuz is so large. There’s more than 18 million barrels a day, about two-thirds of world maritime oil trade. Meaning, cutting oil from there will lead to an acute oil shortage and prices will skyrocket,” Muhanna said.


BMW picks insider Zipse as CEO to catch up with rivals

Oliver Zipse
Updated 19 July 2019
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BMW picks insider Zipse as CEO to catch up with rivals

  • German giant has lost ground to Mercedes-Benz and Tesla as tech steps up

FRANKFURT: BMW has named Oliver Zipse as its new CEO, continuing the German carmaker’s tradition of promoting production chiefs to the top job even as the auto industry expands into new areas such as technology and services.
Hailing Zipse’s “decisive” leadership style, BMW hopes the 55-year-old can help it win back its edge in electric cars and the premium market  from rival Mercedes-Benz.
But some analysts questioned whether Zipse was the right choice with new fields such as software and services like car-sharing becoming increasingly important.
“What is intriguing is the cultural bias to appoint the head of production. It works sometimes but ... being good at building cars is not a defining edge the way it was 20 years ago,” said Jefferies analyst Philippe Houchois.
Current CEO Harald Krueger, and former chiefs Norbert Reithofer, Bernd Pischetsrieder and Joachim Milberg were all former production heads.
Zipse joined BMW as a trainee in 1991 and served as head of brand and product strategies and boss of BMW’s Oxford plant in England before joining the board.
He will become chief executive on Aug. 16, taking over from Krueger who said he would not be available for a second term.
“With Oliver Zipse, a decisive strategic and analytical leader will assume the Chair of the Board of Management of BMW. He will provide fresh momentum in shaping  the future,” said Reithofer.
Zipse helped expand BMW’s efficient production network in Hungary, China and the US, in a move that delivered industry-leading profit margins.
Under Krueger, BMW was overtaken in 2016 by Mercedes-Benz as the best-selling luxury car brand.
It also had an early lead over US  rival Tesla in electric cars, but scaled back ambitions after its i3 model failed to sell large numbers.
Reithofer initially championed Krueger’s low-key consensus-seeking leadership, but pressured him to roll out electric vehicles more aggressively, forcing Krueger to skip the Paris Motor Show in 2016 to reevaluate BMW’s electric strategy.
Krueger’s reluctance to push low-margin electric vehicles led to an exodus of talented electric vehicle experts, including Christian Senger, now Volkswagen’s (VW) board member responsible for software, and Audi’s Markus Duesmann, who is seen as a future CEO of the company.
Both were poached by VW CEO Herbert Diess, a former BMW board member responsible for research who was himself passed over for BMW’s top job in 2015.
VW has since pushed a radical 80 billion euro ($90 billion) electric car mass production strategy, and a sweeping alliance with Ford.

Other skills
“A CEO needs to have an idea for how mobility will evolve in the future. This goes far beyond optimising an existing business,” said Carsten Breitfeld, chief executive of China-based ICONIQ motors, and former BMW engineer. “He needs to build teams, attract talent, and promote a culture oriented along consumer electronics and internet dynamics.”
German manufacturers have dominated the high-performance market for decades, but analysts warn shifts towards sophisticated technology and software is opening the door to new challengers.
“Tesla has a lead of three to four years in areas like software and electronics. There is a risk that the Germans can’t catch up,” UBS analyst Patrick Hummel said.
Germany’s Auto Motor und Sport car magazine, normally quick to champion German manufacturers, this week ran a cover questioning BMW’s future.
“Production expertise is important, but if you want to avoid ending up being a hardware provider for Google or Apple, you need to have the ability to move up the food chain into data and software,” a former BMW board member said.