OPEC wary of 2019 surplus as stocks rebuild

Oil prices have rallied this year, with markets expecting US sanctions on Iran to hit supplies by lowering shipments from OPEC’s third-largest oil producer. (Shutterstock)
Updated 11 October 2018
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OPEC wary of 2019 surplus as stocks rebuild

  • OPEC separately updated its oil supply and demand forecasts
  • Trump has demanded that OPEC cool prices by pumping more oil

LONDON: OPEC sees the oil market as well supplied and is wary of creating a glut next year, the group’s secretary-general said on Thursday, suggesting producers are in no rush to expand a June agreement that raises output.
Oil prices have rallied this year on expectations that US sanctions on Iran will strain supplies by lowering shipments from OPEC’s third-largest oil producer. Brent crude last week reached $86.74, the highest since 2014.
OPEC Secretary-General Mohammad Barkindo, speaking at the Oil & Money conference in London, said there were many non-fundamental factors influencing the oil market that were beyond oil producers’ control.
“The market has been reacting to perceptions of a possible supply shortage. The market remains well supplied,” he told a briefing.
“The projections for 2019 clearly show a possible rebuild of stocks,” he said of the supply and demand balance for next year.
OPEC yesterday separately updated its oil supply and demand forecasts, cutting demand estimates for next year due to economic challenges such as trade disputes and volatile emerging markets, and pointing to excess supply.
One of the factors boosting prices, according to analysts and some members of OPEC, has been the decision by US President Donald Trump to reimpose sanctions on Iran.
Trump has demanded that OPEC cool prices by pumping more oil. Barkindo, asked whether Trump’s criticism of OPEC was unfair, said: “The market is currently being largely driven by decisions taken elsewhere — outside OPEC, outside non-OPEC.”
OPEC and allied producers — not including the US — agreed in June to return to 100 percent compliance with output cuts that began in January 2017, after months of underproduction in Venezuela and elsewhere pushed adherence above 160 percent.
OPEC’s report said its own production rose by 132,000 barrels per day in September to 32.76 million bpd, the highest this year, although producers have yet to increase supply enough to reach 100 percent compliance.
Barkindo, responding to a question whether producers needed to go beyond full delivery of the agreement, said they were taking it step by step.
“We have to continue to assess to see how and when we will achieve the 100 percent conformity and how the market would respond, hoping that some of these non-fundamental factors will evaporate by then,” he said.
“We remain faithful to what we agreed in June.”
OPEC and its allies hold their next meeting in December to decide policy for next year.
In the report released yesterday, OPEC cut the estimate for demand in 2019 for its own crude to 31.8 million bpd because of weaker demand and rising supplies outside the group.
Should OPEC keep pumping at September’s rate, the report points to an excess supply of almost 1 million bpd in 2019 — although this is before any sizeable reduction takes place in Iranian output.
Iran pumped 3.45 million bpd in September, according to figures in the report, down 150,000 bpd from August. Production dropped below 2.7 million bpd under previous sanctions that were lifted following the 2015 nuclear deal.
Barkindo said oil producers were worried about their levels of spare output capacity, which reduces their ability to make up for sudden supply shortages, amid a reduction in energy-industry investment.
“We are very concerned,” Barkindo said when asked about spare capacity, citing a continued decline in oil industry investment resulting from a market downturn that began in 2014.
Saudi Arabia is the only oil producer with significant spare capacity on hand to supply the market if needed.
The Kingdom will invest $20 billion over the next few years to maintain and possibly even expand its spare oil production capacity, Saudi Arabia Energy Minister Khalid Al-Falih said this month.


Can a hungry Mali turn rice technology into ‘white gold’?

Updated 20 October 2018
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Can a hungry Mali turn rice technology into ‘white gold’?

  • Malians are cautiously turning to a controversial farming technique to adapt to the effects of climate change
  • Dubbed the System of Rice Intensification (SRI), the new method was pioneered in Madagascar in 1983

BAGUINEDA: When rice farmers started producing yields nine times larger than normal in the Malian desert near the famed town of Timbuktu a decade ago, a passerby could have mistaken the crop for another desert mirage.
Rather, it was the result of an engineering feat that has left experts in this impoverished nation in awe — but one that has yet to spread widely through Mali’s farming community.
“We must redouble efforts to get political leaders on board,” said Djiguiba Kouyaté, a coordinator in Mali for German development agency GIZ.
With hunger a constant menace, Malians are cautiously turning to a controversial farming technique to adapt to the effects of climate change.

 

Dubbed the System of Rice Intensification (SRI), the new method was pioneered in Madagascar in 1983. It involves planting fewer seeds of traditional rice varieties and taking care of them following a strict regime.
Seedlings are transplanted at a very young age and spaced widely. Soil is enriched with organic matter, and must be kept moist, though the system uses less water than traditional rice farming.
Up to 20 million farmers now use SRI in 61 countries, including in nearby Sierra Leone, Senegal and Ivory Coast, said Norman Uphoff, of the SRI International Network and Resources Center at Cornell University in the US.
But, despite its success, the technique has been embraced with varying degrees of enthusiasm. Uphoff said that is because it competes with the improved hybrid and inbred rice varieties that agricultural corporations sell.
For Faliry Boly, who heads a rice-growing association, the prospect of rice becoming a “white gold” for Mali should spur on authorities and farmers to adopt rice intensification.
The method could increase yields while also offering a more environmentally-friendly alternative, including by replacing chemical fertilizers with organic ones, he said.
He also pointed out that rice intensification naturally lends itself to Mali’s largely arid climate.

FACTOID

Up to 20 million farmers now use rice intensification in 61 countries, including in nearby Sierra Leone, Senegal and Ivory Coast.