Saudis cut, Russians hiked output ahead of pact: IEA

This general view taken on October 4, 2018, shows the construction site of Russia's petrochemical holding Sibur's ZapSibNefteKhim plant on the outskirts of Tobolsk. (AFP)
Updated 18 January 2019
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Saudis cut, Russians hiked output ahead of pact: IEA

  • OPEC members along with allies including Russia agreed in early December to trim production by 1.2 mbd from Jan. 1

PARIS: Saudi Arabia demonstrated its resolve to lift oil prices by slashing output ahead of the entry into force of new pact limiting production while Russia boosted output to a record level, the International Energy Agency said Friday.
World oil markets have been on a rollercoaster ride in recent months, with OPEC and its partners including Russia, often called OPEC+, agreeing to cut back production again from January in order to reverse a slump in oil prices on abundant production and worries about slower global growth.
In its latest monthly report, the Paris-based International Energy Agency said the Saudis took the lead by cutting output in December as prices tumbled by more than a third in just two months.
“Recently, leading producers have restated their commitment to cut output and data show that words were transformed into actions,” said the IEA.
“While Saudi Arabia is determined to protect its price aspirations by delivering substantial production cuts, there is less clarity with regard to its Russian partner,” it added.
But the cut was mostly due to the Saudis, with data indicating several OPEC members increased production last month.
The IEA said data show that Russia increased crude oil production in December “to a new record near 11.5 mbd (million barrels per day) and it is unclear when it will cut and by how much.”
OPEC members along with allies including Russia agreed in early December to trim production by 1.2 mbd from Jan. 1, in a bid to eliminate a production glut and shore up prices.
Just months earlier, they had relaxed production caps as prices shot higher on market worries about the impact of US sanctions on Iran, but Washington eventually granted waivers allowing several countries to continue to import Iranian oil.
Meanwhile, US production rose considerably more than expected last year, adding further to supplies, while concerns about demand emerged as the US-China trade spat deepened in the second half of last year.
The IEA said the US increased output by 2.1 mbd last year, the “highest ever” annual growth ever recorded.
The boom of shale oil production in the US this decade has redrawn the map of global energy politics as the nation no longer depends as heavily on imports and has even resumed exports.
The IEA said “the US, already the biggest liquids supplier, will reinforce its leadership as the world’s number one crude producer” in 2019.
“By the middle of the year, US crude output will probably be more than the capacity of either Saudi Arabia or Russia.”
The IEA left its estimate for global oil growth in 2019 unchanged at an increase of 1.4 mbd, saying “the impact of higher oil prices in 2018 is fading, which will help offset lower economic growth.”
It said there were signs that the rebalancing of the oil market will be gradual.


US poised to end waivers for 5 countries importing Iranian oil

Updated 40 min 37 sec ago
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US poised to end waivers for 5 countries importing Iranian oil

  • Japan, South Korea, Turkey, China and India were exempted from sanctions until May 2
  • Since November, Italy, Greece and Taiwan have stopped importing oil from Iran

WASHINGTON: The Trump administration is poised to tell five nations, including allies Japan, South Korea and Turkey, that they will no longer be exempt from US sanctions if they continue to import oil from Iran, officials said Sunday.
Secretary of State Mike Pompeo plans to announce on Monday that the administration will not renew sanctions waivers for the five countries when they expire on May 2, three US officials said. The others are China and India.
It was not immediately clear if any of the five would be given additional time to wind down their purchases or if they would be subject to US sanctions on May 3 if they do not immediately halt imports of Iranian oil.
The officials were not authorized to discuss the matter publicly and spoke on condition of anonymity ahead of Pompeo’s announcement.
The decision not to extend the waivers, which was first reported by The Washington Post, was finalized on Friday by President Donald Trump, according to the officials. They said it is intended to further ramp up pressure on Iran by strangling the revenue it gets from oil exports.
The administration granted eight oil sanctions waivers when it re-imposed sanctions on Iran after Trump pulled the US out of the landmark 2015 nuclear deal. They were granted in part to give those countries more time to find alternate energy sources but also to prevent a shock to global oil markets from the sudden removal of Iranian crude.
US officials now say they do not expect any significant reduction in the supply of oil given production increases by other countries, including the US itself and Saudi Arabia.
Since November, three of the eight — Italy, Greece and Taiwan — have stopped importing oil from Iran. The other five, however, have not, and have lobbied for their waivers to be extended.
NATO ally Turkey has made perhaps the most public case for an extension, with senior officials telling their US counterparts that Iranian oil is critical to meeting their country’s energy needs. They have also made the case that as a neighbor of Iran, Turkey cannot be expected to completely close its economy to Iranian goods.