Iran looms large over OPEC summit

Participants gather in the lobby ahead of an informal meeting between members of the Organization of Petroleum Exporting Countries, OPEC, in the Algerian capital Algiers. (AFP)
Updated 22 September 2018

Iran looms large over OPEC summit

  • Saudi Arabia only country in Mideast, and perhaps world, with enough capacity to keep market supplied, say experts
  • At Algiers, Opec and leading non-Opec countries are expected to discuss how to allocate supply increases to offset a shortage of Iran supplies

LONDON: The Opec summit in Algiers on Sunday meets amid widespread fears of a supply crunch when a forecast 1.4 million barrels a day of crude is lost from Iran in November when US sanctions kick in.
If, on top of that, more supply shocks hit the market in worse-than-expected disruption from Libya and Iraq, the price of crude could surge, said Andy Critchlow, head of energy news at S&P Global Platts. “At the moment, the market looks finely balanced,” he said.
There isn’t a lot of slack in the system. As Critchlow points out: “Upstream investment in infrastructure and new wells is historically low and it will take a long time to turn that around.”
At Algiers, Opec and leading non-Opec countries are expected to discuss how to allocate supply increases to offset a shortage of Iran supplies. The gathering comes after a tweet by President Trump on Sept. 20 calling on Opec to lower prices. He said on Twitter that “they would not be safe for very long without us, and yet they continue to push for a higher and higher oil price.”
Critchlow reckoned KSA still had spare capacity of about 2 million bpd. And KSA would get oil back as they go into winter as it had needed 800,000m bpd merely to generate electricity for the home market to meet heightened demand for air conditioning in the summer.
But there is uncertainty about what will come out of Algiers. For a start, the Iranians say they will not attend. That could be tricky in terms of an Opec communique at the end of the meeting as statements need unanimous support from member nations. And Iran has indicated it will veto any move that would affect Iran’s position, ie, one where other countries absorb its market share as sanctions bite.
Jason Gammel, energy analyst at London broker Jefferies, said: “The magnitude of the drop in Iranian exports is likely to be higher than any hit in demand as a result of problems linked to emerging market currencies, or trade wars. That’s why we expect oil prices to continue to strengthen. The Saudis and their partners will keep the market well supplied, and I think the issue is that the level of spare capacity in the system will be extremely low. Any threat or interruption will mean price spikes. Possibly by the end of the year demand will exceed supply; for now, the market remains in balance, but threats of supply disruption will bring volatility.”
Under the spotlight in Algiers is a production cuts accord forged by Opec and 11 other countries in 2016 which has been extended to the end of this year. The agreement helped reboot prices and obliterate inventory stockpiles that led to the crash in crude prices nearly three years ago. But how long will the agreement last? Algiers may kick that one into the long grass.
Thomson Reuters analysts Ehsan Ul-Haq and Tom Kenison told Arab News: “OPEC members would like to maintain cohesion within the group around supply ahead of Iran sanctions and declining Venezuela production, However, they are expected be in favor of maintaining stability in prices while doing so. On the other hand, they need to find a consensus around how their market share would be affected by a decision to pump more oil in the market. Any decision around production will likely be offset until the November meeting.”
Critchlow said that it is what KSA and Russia say and do that matters. “They speak for a fifth of the global oil market, producing a combined total of 22m bpd.” Together, they are the swing producers when it comes to crude production and supply.
Another factor about Algiers is that it is a meeting of the Joint Ministerial Monitoring Committee, which is not a policy-making forum. Big policy statements may have to wait for the main Opec summit in Vienna at the end of year. That said, there will be some very high-level delegations in Algiers, including the Saudi oil minister and his Russian counterpart.
A statement about the demand picture could emerge, especially as there are fears about the impact on the global economy from the US-China tariff war.
Looking to the future, Critchlow thought the Opec production cuts accord would carry on into 2019. “Oil priced between $70/bbl and $80/bbl is a sweet spot for Middle East producers. Its’s good for Saudi as it helps stop further drainage of their foreign reserves and moves the budget back toward balance. Do they want (the price) to go higher? I think that would cause a lot of political problems for them.”


Lebanon removes banking secrecy rules to fight corruption

Updated 58 min 53 sec ago

Lebanon removes banking secrecy rules to fight corruption

  • The move opens the way for investigations into bank accounts of current and former officials such as Cabinet ministers

BEIRUT: Lebanon’s parliament approved on Thursday a law to remove decades-old banking secrecy rules in order to better fight rampant corruption that has pushed the country to the edge of economic collapse.
The move opens the way for investigations into bank accounts of current and former officials such as Cabinet ministers, legislators and civil servants, state-run National News Agency reported.
The restoration of stolen public money in the corruption-plagued nation has been a key demand of protesters who have been demonstrating since mid-October against Lebanon’s ruling elite, which they blame for widespread corruption and mismanagement.
The approval of the law came two months after the Cabinet approved a draft resolution to abolish the country’s banking secrecy laws, which have turned tiny Lebanon into the region’s Switzerland, attracting clients from around the Arab world who prized the anonymity its banks offered.
The new law gives powers to National Anti-corruption Commission and a Special Investigative Committee at the central bank to investigate bank account of officials, the report said.
For Thursday’s session, Lebanese lawmakers convened inside a Beirut theater so that they could observe social distancing measures imposed during the pandemic. Dozens of anti-government demonstrators briefly clashed with riot police outside as legislators met.
As lawmakers in face masks arrived at the theater, known as the UNESCO palace, paramedics sprayed them with disinfectant before they entered, one at a time.
Lebanon has been facing its worst economic crisis in decades, with unemployment figures soaring and the local currency losing more than half of its value against the dollar.
After the banking secrecy measure was passed, Parliament Speaker Nabih Berri suspended the session until later in the afternoon when the legislators were to discuss a draft general amnesty law.
The amnesty issue has deeply divided parliamentary blocs, with Christian groups calling for pardoning Lebanese who fled to Israel after it ended its occupation of southern Lebanon in 2000, while former Prime Minister Saad Hariri and others want the release of hundreds of Islamists held as terror suspects.
Lebanon and Israel are at a state of war and some Lebanese who fled to Israel now hold Israeli citizenship. Scores of protesters demonstrated in Beirut and southern Lebanon on Thursday against pardoning those living in Israel.