Once an American enemy, now a friend: OPEC turns 60


LONDON (Reuters) – In 1973, Arab members of the Organization of Petroleum Exporting Countries brought the American economy to its knees. Now, the cartel Washington created 60 years ago is more likely to bid.

FILE PHOTO: Crown Prince Mohammed bin Salman of Saudi Arabia joined hands with US President Donald Trump at the G20 Leaders’ Summit in Osaka, Japan on June 29, 2019. Courtesy of Bandar Algaloud / Saudi Royal Court / Handout via REUTERS ATTENTION EDITORS – THIS PICTURE was provided by a third party / file photo

Since Saudi Arabia and other Arab OPEC members planted their famous oil embargo during the Yom Kippur War as a retaliation for US support for Israel, changes in global politics and increased US oil production have given the group its name .

OPEC’s most disgusting members, Iran and Venezuela, have been sidelined by US sanctions, while its kingpin, Saudi Arabia, has shown that it would appeal to Washington rather than lose the support of US, current and former OPEC officials.

According to officials, OPEC had resisted US pressure to reduce oil prices for decades, especially during Libya’s rebellion against Muammar Gaddafi in 2011, a record that has been largely one in the last three years.

Set in Baghdad on September 14, 1960 to counter the power of seven American and British oil companies, OPEC repeatedly pressured Washington to pump more oil as US President Donald Trump took office in early 2017 Was.

Trump has regularly called for helping American consumers to reduce gasoline prices.

When prices fell too low for US drilling companies to make money this year, OPEC made a deal to bring them back a bit, in an agreement made on Washington’s threat to reduce its military support for Riyadh. Did, sources have told Reuters. reut.rs/3m4gBSr

“What they need – and are served – by Trump’s orders for the price of oil,” said Algeria’s oil minister for a decade and OPEC president in 2001 and 2008, Chakib Khalil. “” So actually OPEC has changed. “

The Saudi Ministry of Energy declined to comment.

The White House declined to comment.

Reuters spoke to eight current and former OPEC officials, representing more than a third of the group’s output, as well as asking analysts, traders and investors how US sanctions on Iran and Venezuela would impact Saudi Arabia’s influence within OPEC Was impressed, and whether he had changed the dynamic with Washington.

An OPEC official at the group’s Vienna headquarters declined to comment, stating that Reuters should ask member states. Oil and other government officials in Iran and Venezuela did not immediately respond to requests for comment.

Outing america

Saudi Arabia has been a leading OPEC producer for decades, giving it the greatest authority on policy, but its influence has been increased by the sidelining of Iran and Venezuela.

According to Reuters calculations based on OPEC data, Iran’s share in OPEC’s production has declined by about 7.5% since 2010, while Venezuela has fallen from around 10% to 2.3%. Meanwhile, Saudi Arabia’s share has risen 7 percent to 35%.

Iran and Venezuela, who founded OPEC along with Iraq, Kuwait and Saudi Arabia, regularly opposed any move to bring down oil prices under US pressure.

Saudi Arabia’s increasing dominance within OPEC has also come at a time of high US oil and gas production, which has transformed the United States into the world’s largest petroleum producer and reduced its dependence on foreign fuels.

According to the Energy Information Administration, US production doubled in a decade to reach 12 million barrels a day in 2019, as improved drilling technology made previously unused basins accessible.

OPEC figures show that the US share of the global oil market has doubled since 2010, while OPEC has declined.

OPEC formed a group called OPEC + in 2016 to collaborate with Russia and nine other oil producers to promote their collective leverage, but a senior Trump administration official said the new group’s influence would increase US production. The reason was reduced.

‘OPEC is on the IT Edge’

Trump has engaged more actively with OPEC than his predecessors, often taking to Twitter to comment on production decisions and the price of oil.

Trump has also developed a close relationship with Saudi Arabia’s de facto ruler, Mohammed bin Salman, or “MBS”, which relies on the United States for protection against weapons and regional rivals such as Iran.

“No US administration has ever been more involved in international governance and OPEC than in the Trump presidency,” said Gary Ross, founder of Black Gold Investors and an OPEC expert.

In 2018, as oil prices exceeded $ 70 a barrel, a level Washington was too high for American consumers, Trump fired a barrage of tweets at the cartel.

“Oil prices are very high, OPEC is on it again. No good! “He tweeted on 13 June 2018, nine days before the OPEC meeting. As OPEC gathered in Austria on 22 June, Trump wrote:” Hopefully OPEC will increase production significantly. Need to keep prices down is! “

Later that day, OPEC agreed to increase its production to one million barrels a day.

Two OPEC officials, who asked not to be identified because of the sensitivity of the issue, a Trump intervention on oil prices effectively influenced the organization to discuss, or even adjust, its production policy did.

And Trump’s Twitter feed has become a source of concern.

“I expect there will be no tweet,” a top OPEC official told Reuters on April 9, 2019, after oil prices reached $ 71 a barrel, a five-month high at the time.

Oil market watchers, including OPEC officials, say the irony is that the price increases in 2018 and 2019 were both primarily due to Washington’s sanctions on Iran and Venezuela – policies that led to around 3 from daily oil production Millions of barrels slipped.

Graphic: OPEC Market Share 2010 and 2020

Great for the industry!

Earlier this year, Trump wanted something new from OPEC: a production cut to help US oil companies make money.

Oil prices were caused by a supply war between Saudi Arabia and Russia, due to a drop in demand due to worldwide coronovirus lockdowns.

“Just talked to my friend MBS (Crown Prince) of Saudi Arabia, who spoke with President Putin of Russia, and I hope and hope that they will be cutting about 10 million barrels, and maybe much more. , If it happens, “be great for the oil and gas industry! “Trump tweeted on April 2.

On 12 April, OPEC + agreed to a record reduction in production equivalent to 10th global production.

Reuters reported on April 30 that Trump had presented bin Salman with an ultimatum: production cuts or the risk of US troops withdrawing from the state.

When asked about the ultimatum of the time, Trump said: “I didn’t need to tell him.” He said that he had talked to MBS over the phone and they were able to negotiate a cut on production.

Saudi Arabia’s government media office did not respond to a request for comment on the April report.

Khalil of Algeria said, “In short, OPEC does not make the best decisions for its members financially, as is considered by its statute.”

Graphic: OPEC crude output and US oil supply as% of world total

‘GIFT TO TRUMP’

In 2011, when Libyan production was affected by the revolt against Gaddafi, Saudi Arabia tried to convince OPEC to increase production at lower prices. But Algeria, Angola, Ecuador, Iran, Iraq, Libya and Venezuela all protested.

“Previously, you had a block that could be quite vocal and actually enhance meetings,” said Samuel Szyuk, who founded the consulting ELS analysis and worked for the Swedish Energy Agency.

“Now, Iran and Venezuela still have the votes but are sidelined and have such desperate economic and marketing conditions that other countries are more careful about engaging with them politically,” he said.

Iran’s former OPEC governor Hossein Kazampor Ardebili told Reuters in 2018, when OPEC + increased production only after Trump’s pressure, that both OPEC and the wider group began to work against the interests of its younger members .

“He gifted Trump an oil price to all OPEC members facing revenue losses,” he said.

However, there is no suggestion that OPEC is going to withstand the exodus of younger members as a result of the shifting dynamic – and new entrances – that some countries have left.

Qatar left in 2019, partly due to a political queue with Riyadh. Another small producer, Ecuador, departed this year and Indonesia in 2016. Both said they do not want to be constrained by OPEC’s production quota.

Others who may be unhappy with OPEC’s trajectory, however, plan to stay so they can still say no.

As one source familiar with Iran’s oil policy stated: “It is important to be a member of OPEC or OPEC + so that you can maximize your interests.”

Additional reporting by Dmitry Zadanikov, Bozorgmehr Sharafedin and Marianna Perga; Editing by Richard Waldmanis and David Clarke

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