World can rely on OPEC supply cushion for urgent oil needs: IEA

Paris-based International Energy Agency said that Venezuela’s oil industry operations were seriously disrupted by the blackout. (File/AFP)
Updated 15 March 2019
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World can rely on OPEC supply cushion for urgent oil needs: IEA

  • International Energy Agency warned of “ongoing losses on a significant scale could present a challenge to the market,” referring to crisis-hit Venezuela
  • But OPEC members have about 2.8 mbd of spare production capacity, with much of it being similar in quality to oil produced in Venezuela

PARIS: Production cutbacks by OPEC nations are building a supply cushion that could be called upon to mitigate a possible supply shock from an abrupt drop in crisis-hit Venezuela’s output, the IEA said Friday.
With a nationwide blackout that paralyzed the country for one week, demonstrating the unreliability of the country’s electricity network, new questions are being raised about Venezuela’s ability to continue to produce and export oil.
In its latest monthly report, the Paris-based International Energy Agency said that Venezuela’s oil industry operations were seriously disrupted by the blackout and warned that “ongoing losses on a significant scale could present a challenge to the market.”
Venezuela’s oil output has long been on a downward spiral thanks to years of underinvestment and mismanagement, with stepped-up US sanctions further trimming exports.
However the IEA also noted that Venezuela’s current oil production of about 1.2 million barrels per day (mbd) is the size of production cuts agreed by members of the OPEC oil cartel and a number of other nations led by Russia, a grouping often called OPEC+.
Overall, it said OPEC members have about 2.8 mbd of spare production capacity, with much of it being similar in quality to oil produced in Venezuela, which means it could be used without much, if any, adjustment by refineries.
“Therefore, in the event of a major loss of supply from Venezuela, the potential means of avoiding serious disruption to the oil market is theoretically at hand,” said the IEA, adding that “production cuts have increased the spare capacity cushion.”
The agency, which advises oil-consuming nations on energy issues, said that thanks to bigger-than-promised cuts by Saudi Arabia and its Gulf allies, the OPEC+ effort to trim output was beginning to work.
Since 2016 the OPEC+ nations have agreed on a series of output limits in an effort to counteract the collapse of oil prices in 2014 caused by overproduction. After oil prices had a rollercoaster ride at the end of last year, OPEC+ agreed to cut production by 1.2 mbd in January to June.
The IEA said OPEC+ production was 0.24 mbd above the target of 44.3 mbd, with overall compliance with reduction targets at 80 percent.
“OPEC’s compliance was a robust 94 percent, compared to 51 percent from non-OPEC,” said the IEA, adding that major producer Russia was continuing to adjust its production gradually.
“If the producers deliver on their promises, the market could return to balance in the second quarter” of this year, said the IEA.
The IEA left unchanged its forecast for non-OPEC supply increasing to 64.4 mbd this year from a revised 62.7 mbd in 2018, a gain of 1.7 mbd.
It left unchanged its forecast for global oil demand growth of 1.4 mbd to an average of 100.6 mbd in 2019.


US securities regulator: Musk’s contempt defense ‘borders on the ridiculous’

The Securities and Exchange Commission said Elon Musk’s argument that tweeting about car production forecasts on February 19 was not material information was nearly ridiculous. (AP)
Updated 11 min 28 sec ago
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US securities regulator: Musk’s contempt defense ‘borders on the ridiculous’

  • SEC lawyers: Elon Musk had not had a single tweet approved by a company lawyer, violating a requirement of a court-approved settlement order
  • ‘His interpretation is inconsistent with the plain terms of this court’s order and renders its pre-approval requirement meaningless’

DETROIT: US securities regulators countered Tesla CEO Elon Musk’s contempt-of-court defense Monday night, writing in court papers that he brazenly disregarded a federal judge’s order and that one of his arguments “borders on the ridiculous.”
Lawyers for the Securities and Exchange Commission, in a response to Musk, wrote that when the contempt motion was filed in February, Musk had not had a single tweet approved by a company lawyer, violating a requirement of a court-approved settlement order.
The October securities fraud settlement stemmed from tweets by Musk in August about having the money to take Tesla private at $420 per share. But Musk didn’t have the funding secured. Tesla and Musk each had to pay $20 million in fines and agree to governance changes that included Musk’s removal as chairman.
SEC lawyers led by Cheryl Crumpton wrote in a response to Musk’s defense that he interprets the settlement order as not requiring pre-approval unless Musk decides the tweets are meaningful to investors. The agency said Musk’s argument that tweeting about car production forecasts on Feb. 19 wasn’t material information is nearly ridiculous. “His interpretation is inconsistent with the plain terms of this court’s order and renders its pre-approval requirement meaningless,” the lawyers wrote.
US District Judge Alison Nathan in Manhattan will decide if Musk is in contempt and whether he should be punished. The SEC said no hearing is necessary on the matter “because there appear to be no disputed issues of material fact.”
Musk’s lawyers wrote last week that the Feb. 19 tweet merely restated previously approved disclosures on electric car production volumes. They wrote that the tweet, which was published after the markets closed, neither revealed material information, nor altered the mix of data available to investors.
The lawyers also accused the Securities and Exchange Commission of censorship and of violating Musk’s First Amendment rights by imposing a prior restraint on his speech.
But the SEC lawyers wrote that submitting statements for approval does not mean Musk is prohibited from speaking. “As long as a statement submitted for pre-approval is not false or misleading, Tesla would presumably approve its publication without prior restraint on Musk,” they wrote. The SEC also wrote that Musk waived any First Amendment challenge to the order when he agreed to it.
Musk’s lawyers also argued that the SEC’s motion for contempt is an over-reach that exceeds its authority. But the SEC said enforcement of the order is up to the judge, who has broad powers to enforce court orders.
Monday’s filing said the Feb. 19 tweet was different from prior public disclosures by the company. Also, Musk has regularly published tweets with “substantive information” about the company and its business, the SEC contended.
Musk’s 13-word Feb. 19 tweet said that Tesla would produce around 500,000 vehicles this year, but it wasn’t approved by the company’s “disclosure counsel,” the SEC has said.
The lawyer quickly realized it and summoned Musk to the company’s Fremont, California, factory to help write a correction. The company would make vehicles at a rate of 500,000 per year, but it wouldn’t produce a half-million in 2019.
Musk’s response by former Enron prosecutor John C. Hueston of Newport Beach, California, said that the settlement allows Musk “reasonable discretion” to determine if his communications would require the lawyer’s approval. In the case of the Feb. 19 tweet, Musk determined that it did not.
Legal experts say it’s unlikely that Musk will be punished severely, but the commission wants to get on the record that Musk violated the terms, to prepare for any future violations.
The tweet was posted and corrected after US markets had closed, but experts say regulators don’t care much about that because stocks are traded nearly around the clock. Tesla’s stock rose by just $1.10, or less than 1 percent, the next day.