Oil adds another dollar as Iran sanctions loom

A US Navy soldier onboard Mark VI Patrol Boat stands guard as an oil tanker makes its way towards Bahrain port, during an exercise. (Reuters)
Updated 11 September 2018

Oil adds another dollar as Iran sanctions loom

  • US sanctions to target Iran oil exports from November
  • Washington wants other producers to replace falling Iran exports

LONDON: Oil prices rose about $1 a barrel on Tuesday as US sanctions squeezed Iranian crude exports, tightening global supply despite efforts by Washington to get other producers to increase output.
Brent crude futures rose $1.13 to $78.50 a barrel while WTI crude gained $1.10 to $68.64 a barrel in mid afternoon trade in London.
“The impact of the US sanctions on Iran is firmly being felt,” said Tamas Varga, analyst at London brokerage PVM Oil. “The biggest worry is obviously the amount of Iranian oil that is disappearing from the market.”
Washington has told its allies to reduce imports of Iranian oil and several Asian buyers, including South Korea, Japan and India appear to be falling in line.
But the US government does not want to push up oil prices, which could depress economic activity or even trigger a slowdown in global growth.
US Energy Secretary Rick Perry met Saudi Energy Minister Khalid Al-Falih on Monday in Washington, as the Trump administration encourages big oil-producing countries to keep output high. Perry will meet with Russian Energy Minister Alexander Novak on Thursday in Moscow.
Russia, the US and Saudi Arabia are the world’s three biggest oil producers by far, meeting around a third of the world’s almost 100 million barrels per day (bpd) of daily crude consumption.
Their combined output has risen by 3.8 million bpd since September 2014, more than the peak output Iran has managed over the last three years.
Russian Energy Minister Alexander Novak said on Tuesday that Russia and a group of producers around the Middle East which dominate OPEC may sign a new long-term cooperation deal at the beginning of December, the TASS news agency reported. Novak did not provide details.
A group of OPEC and non-OPEC producers have been voluntarily withholding supplies since January 2017 to tighten markets, but with crude prices up by more than 40 percent since then and markets significantly tighter, there has been pressure on producers to raise output.
As Middle East markets tighten, Asian buyers are seeking alternative supplies, with South Korean and Japanese imports of US crude hitting a record in September.
US oil producers are seeking new buyers for crude they used to sell to China before orders slowed because of the trade disputes between Washington and Beijing.
This is one reason that the discount for US crude versus Brent has widened to around $10 per barrel, the biggest since June, traders said.


General Motors and workers union contract expires, increases risk of strike

Updated 30 min 47 sec ago

General Motors and workers union contract expires, increases risk of strike

  • Union officials told General Motors they would let the contract lapse just before midnight Saturday
  • A strike by 49,200 union workers would bring to a halt GM’s US production

DETROIT: The four-year contract between General Motors and the United Auto Workers has expired as negotiations on a new deal continue.
Union officials told GM they would let the contract lapse just before midnight Saturday, increasing the risk of a strike as early as Sunday night. Union members working Sunday were to report as scheduled.
But there was a wrinkle. About 850 UAW-represented janitors who work for Aramark, a separate company, went on strike Sunday after working under an extended contract since March of 2018, the union said.
The strike covered eight GM facilities in Ohio and Michigan. Although UAW workers at GM are supposed to work, it wasn’t clear early Sunday whether the rank-and-file would cross their own union’s picket lines. GM said in a statement that it has contingency plans for any disruptions from the Aramark strike.
UAW Vice President Terry Dittes said in a letter to members that, after months of bargaining, both the union and GM are far apart on issues such as wages, health care, temporary employees, job security and profit-sharing.
The union’s executive leaders and a larger group of plant-level officials will meet Sunday morning to decide the union’s next steps.
The letter to members and another one to GM were aimed at turning up the pressure on GM negotiators.
“While we are fighting for better wages, affordable quality health care, and job security, GM refuses to put hard working Americans ahead of their record profits,” Dittes, the union’s chief bargainer with GM, said in a statement Saturday night.
Kristin Dziczek, vice president of the Center for Automotive Research, an industry think tank, said the union could strike at GM after the contract expires.
“If they’re not extending the agreement, then that would leave them open to strike,” she said.
But GM, in a statement Saturday night, still held out hope for an agreement, saying it continues to work on solutions.
“We are prepared to negotiate around the clock because there are thousands of GM families and their communities — and many thousands more at our dealerships and suppliers — counting on us for their livelihood. Our goal remains on building a strong future for our employees and our business,” the GM statement said.
A strike by 49,200 union workers would bring to a halt GM’s US production, and would likely stop the company from making vehicles in Canada and Mexico as well. That would mean fewer vehicles for consumers to choose from on dealer lots, and it would make it impossible to build specially ordered cars and trucks.
The union’s executive board was to meet early Sunday to talk about the union’s next steps, followed by a meeting in Detroit of plant-level union leaders from all over the country. An announcement was scheduled for after the meetings end.
If there is a strike, it would be the union’s first since a two-day work stoppage at GM in 2007.
The move by the union also comes as it faces an internal struggle over a federal corruption investigation that has touched its president, Gary Jones. Some union members are calling for Jones to step down while the investigation continues. But Friday night, union leaders did not remove Jones.
Union officials surely will face questions about the expanding investigation that snared a top official on Thursday. Vance Pearson, head of a regional office based near St. Louis, was charged with corruption in an alleged scheme to embezzle union money and spend cash on premium booze, golf clubs, cigars and swanky stays in California. It’s the same region that Jones led before taking the union’s top office last year. Jones has not been charged.
On Friday, union leaders extended contracts with Ford and Fiat Chrysler indefinitely, but the pact with General Motors was still set to expire Saturday night.
The union has picked GM, which is more profitable than Ford and Fiat Chrysler, as the target company, meaning it’s the focus of bargaining and would be the first company to face a walkout. Picket line schedules already have been posted near the entrance to one local UAW office in Detroit.
Talks between the union and GM were tense from the start, largely because GM plans to close four US factories. The union has promised to fight the closures.