OPEC output hits new low on Trump’s sanctions, supply pact

Saudi Arabia's Oil Minister Khalid Al-Falih talks to journalists at the beginning of an OPEC meeting in Vienna, Austria, on July 1, 2019. (REUTERS/File Photo)
Updated 06 July 2019

OPEC output hits new low on Trump’s sanctions, supply pact

  • Saudi Arabia is still voluntarily pumping less than an OPEC-led supply deal allows it to

LONDON: OPEC oil output sank to a new five-year low in June as a rise in Saudi supply did not offset losses in Iran and Venezuela due to US sanctions and other outages elsewhere in the group, a Reuters survey found.

OPEC pumped 29.60 million barrels per day (bpd) last month, the survey showed, down 170,000 bpd from May’s revised figure and the lowest OPEC total since 2014, the survey showed.

The Reuters survey suggests that even though Saudi Arabia is raising output following pressure from US President Donald Trump to bring down prices, the Kingdom is still voluntarily pumping less than an OPEC-led supply deal allows it to. OPEC renewed the supply pact at meetings this week.

Despite lower supplies, crude oil has fallen from a six-month high above $75 a barrel in April to below $63 on Friday, pressured by concern about slowing economic growth. “The decision of OPEC+ at the beginning of the week to extend its production cuts has done nothing to change this,” Carsten Fritsch, analyst at Commerzbank, said of this week’s drop in prices. “A series of disappointing economic data from the United States, China and Europe has sparked new concerns about demand.”

OPEC, Russia and other non-members, known as OPEC+, agreed in December to reduce supply by 1.2 million bpd from Jan. 1 this year. OPEC’s share of the cut is 800,000 bpd, to be delivered by 11 members — all except Iran, Libya and Venezuela. The producers at meetings this week in Vienna extended the deal until March 2020.

In June, OPEC members bound by the agreement achieved 156 percent of pledged cuts, the survey found, more than in May, due to lower production in Iraq, Kuwait and Angola. All three of the exempt producers also pumped less oil.

The US reimposed sanctions on Iran in November after pulling out of a 2015 nuclear accord between Tehran and six world powers. Aiming to cut Iran’s sales to zero, Washington this month ended sanctions waivers for importers of Iranian oil.

Iran’s crude exports have declined to less than 400,000 bpd from more than 2.5 million bpd in April 2018.

In Venezuela, supply fell slightly in June due to the impact of US sanctions on state oil company PDVSA and a long-term decline in production, according to the survey.

Among countries pumping more, Saudi Arabia boosted supply by 100,000 bpd to 9.8 million bpd from May’s revised figure, the survey found. This is still below its OPEC quota of 10.311 bpd.

Output also rose in Nigeria, which last month overproduced its target by the largest margin.

June output was the lowest by OPEC since April 2014, excluding membership changes that have taken place since then, Reuters surveys show.

The Reuters survey aims to track supply to the market and is based on shipping data provided by external sources, Refinitiv Eikon flows data and information provided by sources at oil companies, OPEC and consulting firms. 


Automakers expect Trump will delay decision on imposing EU, Japan tariffs

Updated 13 November 2019

Automakers expect Trump will delay decision on imposing EU, Japan tariffs

  • Foreign companies are eager to highlight US investments to try to dissuade US president

Major automakers think US President Donald Trump will again this week push back a self-imposed deadline on whether to put up to 25 percent tariffs on national security grounds on imported cars and parts from the EU and Japan amid an ongoing trade war with China, five auto officials told Reuters.

The anticipated delay — expected to be announced later this week — comes as foreign automakers are eager to highlight US investments to try to dissuade Trump from using tariffs that they argue could cost US jobs.

US Commerce Secretary Wilbur Ross said earlier this month tariffs may not be necessary. EU officials expect Trump to announce a six-month delay when he faces a self-imposed deadline this week. Trump in May delayed a decision on tariffs by up to 180 days as he ordered US Trade Representative Robert Lighthizer to pursue negotiations.

Lighthizer’s office recently asked many foreign automakers to provide a tally of investments they have made in the US, several auto industry officials told Reuters.

The White House and Lighthizer’s office declined to comment.

FASTFACTS

• US is considering 25 percent tariffs on national security grounds on imported cars and parts from the EU and Japan.

• President Donald Trump in May delayed a decision on tariffs by up to 180 days as he ordered US Trade Representative Robert Lighthizer to pursue negotiations.

On Wednesday, Tennessee Gov. Bill Lee, a Republican ally of Trump’s, plans to attend a groundbreaking at Volkswagen AG’s Chattanooga assembly plant where they will mark the beginning of an $800 million expansion to build electric vehicles and add 1,000 jobs. The high-profile event will also include remarks from Germany’s ambassador to the US.

VW announced the plan to begin producing EVs by 2022 in Tennessee in January.

Daimler AG said in late 2017 it planned to invest $1 billion to expand its manufacturing footprint around Tuscaloosa, Alabama, creating more than 600 jobs. Tariffs on Japan seem even less likely than the EU, experts say.

Japanese automakers and suppliers have announced billions of dollars in investments, most notably a $1.6 billion joint venture plant in Alabama by Toyota Motor Corp and Mazda Motor Corp.

Trump and Japanese Prime Minister Shinzo Abe signed a limited trade deal in September cutting tariffs on US farm goods, Japanese machine tools and other products.

Although the agreement does not cover trade in autos, Abe said in September he had received reassurance from Trump that the US would not impose auto tariffs on national security grounds. Lighthizer said the two countries would tackle cars in negotiations expected to start next April.

Stefan Mair, member of the executive board of the BDI German industry association, said a deal to permanently remove the threat of tariffs was needed. “The investments that are not being made are costing us the growth of tomorrow, even in sectors that are seemingly not affected,” he said.

Germany’s merchandise trade surplus with the US — $69 billion in 2018 — remains a sore point with the Trump administration as does Japan’s $67.6 billion
US trade surplus last year — with two-thirds of that in the auto sector.