PARIS/NEW YORK (Reuters)- Saudi Arabian Oil Minister Ali al-Naimi mounted his most direct rhetorical attack against high oil prices on Wednesday, but showed no sign of moving to increase supplies even as France joined the United States and Britain in talks for a release of strategic reserves.
Two weeks after Reuters initially reported that Britain and the United States were set to agree on tapping emergency stockpiles, French Energy Minister Eric Besson said the European nation was also in talks with Washington. Le Monde reported that the move could come in a matter of weeks.
At the same time, the Financial Times published a rare opinion piece by the head of the world’s largest crude oil exporter, who said a feared shortage of oil supplies was a “myth” but reiterated that Saudi Arabia was ready, able and willing to meet any gap in supplies.
The moves emphasized the growing concern from both sides of the market — producers and consumers — about the economic and political impact of the 15 percent jump in oil prices this year. But it also highlighted the different responses they are taking.
Any release of strategic reserves is expected to be based on the assumption that oil markets face a shortage of crude, putting Western economies directly in opposition to the opinions offered this month by top exporter Saudi Arabia.
Naimi’s comments were his bluntest yet on oil prices, which have been driven by the loss of supplies from several producers across the world and, more importantly, by the threat of a disruption from Iran.
“The bottom line is that Saudi Arabia would like to see a lower price,” he said.
“Supply is not the problem, and it has not been a problem in the recent past. There is no rational reason why oil prices are continuing to remain at these high levels.”
But in the editorial, Naimi fell short of saying that the kingdom planned to increase production. Oil markets, already trading lower on the day after news of the French talks with the United States, barely budged after his comments.
Oil markets have been gripped this year by expectations U.S. and EU sanctions against Tehran aimed at halting the OPEC nation’s nuclear ambitions will cause a shortage in global oil market.
Global supplies are already down by more than a million barrels per day, according to a Reuters survey, due to outages in Yemen, Syria, South Sudan and the North Sea.
Rising oil prices have become a major headache for politicians around the world, including U.S. President Barack Obama who is aiming for re-election in November and facing public anger over soaring U.S. gasoline prices.
Earlier in March, British sources said London was prepared to cooperate with Washington on a release of strategic oil stocks that was expected within months, in a bid to prevent fuel prices from choking economic growth.
A White House official reiterated that the United States was considering a reserve release but no decisions had been made.
“As we have said repeatedly, while this is an option that remains on the table, no decisions have been made and no specific actions have been proposed,” White House spokesman Josh Earnest told reporters.
“Anybody who tries to convince you — in this government or any other government, frankly — that specific decisions have been made or actions have been proposed is not speaking accurately.”
Fuel prices in France have hit record levels, prompting an intense debate between presidential candidates, also ahead of a national election. The French budget minister and government spokeswoman, Valerie Pecresse, told journalists France had joined the United States and the UK in IEA consultations to receive authorization to draw from strategic stocks.
Oil reserve releases are normally coordinated by the International Energy Agency that represents 28 industrialized countries on energy policy.
But the head of the IEA, Maria van der Hoeven, has said on several occasions that a coordinated IEA release is not warranted because there is no significant supply disruption on world oil markets. Germany and Italy say they are opposed.
Van der Hoeven said earlier this month that countries could choose unilaterally to release stocks in consultation with the agency. The IEA declined further comment on Wednesday.
The Paris-based IEA has authorized only three coordinated releases since it was founded in 1974, with the last one in June 2011 in response to lost Libyan production during its civil war.
The government in Berlin said it was unaware of any official request from the United States to release emergency oil stockpiles and did not believe the current situation justified such action under German law.
The German law on oil provisions says emergency reserves can only be released in the case of “physical disruption to supplies. In our view, there is no physical shortage at the moment,” a government spokeswoman told reporters.
Saudi Arabia is the only country in the world with significant spare capacity to compensate for a major supply shortfall.
Naimi last week insisted Saudi Arabia could immediately ramp up production up to its full strength — 12.5 million barrels per day (bpd) — from 9.9 million bpd now if buyers requested more oil.
In his piece on Wednesday, Naimi said that the OPEC kingpin did not want rising fuel costs to undermine the economy of consumer nations. Earlier this year he identified $100 a barrel as an ideal price for producers and consumers, about $25 below current world prices.
“I hope by speaking out on the issue that our intentions – and capabilities – are clear. We want to see stronger European growth and realize that reasonable crude oil prices are key to this,” he wrote, adding Saudi Arabia had a responsibility to “do what it can to mitigate prices.”
But, echoing his comments from last week, the oil minister said that it was not actual supply disruptions that were driving up prices, but political tensions and worries about potential shortages that were driving the market.
“It is the perceived potential shortage of oil keeping prices high – not the reality on the ground,” he said. “There is no lack of supply. There is no demand which cannot be met.”
- IEA sees no disruptions in oil markets (business.financialpost.com)
- Saudi Arabia sends tankers to US with pledge to bring down oil price (telegraph.co.uk)
- Murky data makes oil trading tricky (business.financialpost.com)
- Oil Prices: Saudi Pumping Surge & US-EU Iran Strategy (globalbarrel.com)
- Saudi Vela To Send 11 Supertankers To US In March/April (gcaptain.com)
Feb. 13 (Bloomberg) — Sanctions on Iran are tightening after Overseas Shipholding Group Inc., Frontline Ltd. and owners controlling more than 100 supertankers said they would stop loading cargoes from the Organization of Petroleum Exporting Countries‘ second-largest producer.
OSG, based in New York, said Feb. 10 that the pool of 45 supertankers from seven owners in which its carriers trade will no longer go to Iran. Four OSG-owned ships, managed by Tankers International LLC, called at the country’s biggest crude-export terminal in the past year, ship-tracking data compiled by Bloomberg show. Nova Tankers A/S and Frontline, with a combined 93 vessels, said Feb. 9 and 11 they wouldn’t ship Iranian crude.
Previous efforts to curb Iran’s oil income and stop it from developing nuclear weapons failed because the structure of the shipping industry means vessels are often managed by companies outside the U.S. or European Union. An EU embargo on Iranian oil agreed to Jan. 23 extended the ban to ship insurance. With about 95 percent of the tanker fleet insured under rules governed by European law, there are fewer vessels able to load in Iran.
“It’s the insurance that’s completed the ban on trading with Iran,” said Per Mansson, a shipbroker for 31 years and managing director of Norocean Stockholm AB, which handles tanker charters. “Last summer, many countries started to be a little bit tougher, but the insurance is the real trigger.”
OSG’s Overseas Rosalyn, which can carry about 2 million barrels, arrived at Kharg Island on Jan. 27 and departed the next day, tracking data compiled by Bloomberg show. It left about 16 feet deeper in the water, an indication it loaded cargo. The vessel is managed by Tankers International, which has its head office in Cyprus. OSG complies with all U.S. and European laws and its headquarters in New York doesn’t manage charters, OSG Chief Executive Officer Morten Arntzen said in an e-mail Jan. 30.
Tankers International told owners the pool’s vessels will no longer sail to Iran after changes to EU regulations, Arntzen said in a Feb. 10 e-mail. Insurers are no longer able to cover vessels trading in the Persian Gulf nation, he wrote.
Ship owners sometimes group their vessels to coordinate charters and improve earnings. The Tankers International pool operates 45 very large crude carriers, or VLCCs, from OSG and six other companies, including Antwerp-based Euronav NV and St. Helier, Channel Islands-based DHT Holdings Inc.
“All the owners in the pool have stated that they will not trade Iran because of the consequences,” DHT CEO Svein Moxnes Harfjeld said by phone Feb. 10. “DHT is complying with all relevant regulations and sanctions, and following recent developments our vessels have been instructed not to trade Iran.”
Frontline companies including Hamilton, Bermuda-based Frontline Ltd. and Frontline 2012 won’t ship Iranian crude, Jens Martin Jensen, chief executive officer of Frontline Management AS, said by e-mail and phone on Feb. 11 and 12. Frontline operates 43 VLCCs, according to its website.
Nova Tankers, the Copenhagen-based operator of a pool of ships including vessels owned by Mitsui O.S.K. Lines Ltd., won’t load Iranian crude because of European sanctions, Managing Director Morten Pilnov said by phone from Singapore on Feb. 9. The pool will have about 50 vessels by the end of this year, according to data on its website.
Nippon Yusen K.K., the second-largest owner of VLCCs, won’t carry Iranian oil if it means ships aren’t insured, Yuji Isoda, an investor relations manager for the Tokyo-based company, said Feb. 9. The company doesn’t yet know how its insurers will handle the EU sanctions, he said by phone.
U.S. and EU leaders are trying to tighten restrictions on business with Iran, which produced 3.55 million barrels of crude a day in January, 11 percent of OPEC’s total, according to data compiled by Bloomberg. Oil sales earned Iran $73 billion in 2010, accounting for about 50 percent of government revenue and 80 percent of exports, the U.S. Energy Department estimates.
The United Nations has imposed four sets of sanctions on Iran, and the International Atomic Energy Agency said in November the country had studied making an atomic bomb. The government in Tehran says its nuclear program is for civilian purposes and that documents held by the IAEA purporting to show designs and tests of weapon components are fakes.
Iran has threatened to block shipments through the Strait of Hormuz in the Persian Gulf, through which about 20 percent of the world’s globally traded oil passes. Crude futures in New York advanced 32 percent to $100.19 a barrel since Oct. 4.
More trade with Iran may be blocked if a bill approved Feb. 2 by the U.S. Senate Banking Committee becomes law, making U.S. companies responsible for the actions of their foreign units when dealing with Iran. A spokesman for committee chairman Tim Johnson, a South Dakota Democrat, declined to comment.
While the Japanese government said last month it would curb imports from Iran, India’s Foreign Secretary Ranjan Mathai said Jan. 17 his country wouldn’t. China, the Persian Gulf country’s largest customer, needs the oil for development, Vice Foreign Minister Zhai Jun told reporters Jan. 11.
Founded in 1948, OSG has 111 vessels and 3,500 employees, according to its website. Its biggest shareholders include the family of board members Oudi and Ariel Recanati, who control about 10 percent, data compiled by Bloomberg show. Oudi Recanati is an Israeli citizen and Ariel Recanati is a U.S. citizen, according to a Sept. 6 filing with the Securities and Exchange Commission. Charles A. Fribourg sits on the board of OSG and Continental Grain Co., the data show.
Shares of OSG, which has 14 supertankers, fell 71 percent in the past year as a glut of vessels drove down transport rates. The company will report a loss of $178.6 million for this year, down from $204.4 million for 2011, according to the median of five analyst estimates compiled by Bloomberg.
Three other OSG vessels from the Tankers International pool called at Kharg Island in the past year, data compiled by Bloomberg show. They fly the Marshall Islands flag, which means they are registered there for regulatory purposes, according to data on the website of International Registries Inc. Almost 9 percent of the tanker fleet is flagged in the Marshall Islands, behind Panama and Liberia, according to data compiled by London- based Clarkson Plc, the world’s biggest shipbroker.
“Ship owners and brokers are now seeing a tightening of sanctions,” said Bob Knight, managing director of tankers at Clarkson in London. “This is a sign that sanctions are starting to bite.”
–With assistance from Michelle Wiese Bockmann and Rob Sheridan in London. Editors: Dan Weeks, Sharon Lindores.
- OSG Says Tanker Pool Will Halt Iran Trade After Sanctions (businessweek.com)
- Another Shipping Bankruptcy Filing Could Signal More on the Way (GMR, ONAVQ, TNK, OSG, NAT, FRO, NM, DRYS) (247wallst.com)
- Despite Sanctions by EU & US, Irani Black Gold Turns into 24K Gold (jafrianews.com)
- Iran threatens to stop Gulf oil if sanctions widened (mb50.wordpress.com)
By Hashem Kalantari
TEHRAN | Fri Jan 27, 2012 8:36am EST
(Reuters) – A law to be debated in Iran’s parliament on Sunday could halt exports of oil to the European Union as early as next week, the semi-official Fars news agency quoted a lawmaker as saying on Friday.
“On Sunday, parliament will have to approve a ‘double emergency’ bill calling for a halt in the export of Iranian oil to Europe starting next week,” Hossein Ibrahimi, vice-chairman of parliament’s national security and foreign policy committee, was quoted as saying.
Parliament is pushing for the export ban to deny the EU a 6-month phase-in of the embargo on Iranian oil that the bloc agreed on Monday as part of a raft of tough new Western sanctions aimed at forcing Iran to curb its nuclear program.
The EU accounted for 18 percent of Iranian crude oil sales in the first half of 2011, according to the U.S. Energy Information Administration (EIA), making it Iran’s second biggest customer after China.
“If the deputies arrive at the conclusion that the Iranian oil exports to Europe must be halted, the parliament will not delay a moment (in passing the bill),” Fars quoted Moayed Hosseini-Sadr, a member of parliament’s energy committee, as saying.
“If Iran’s oil exports to Europe, which is about 18 percent (of Iran’s oil exports) is halted the Europeans will surely be taken by surprise, and will understand the power of Iran and will realize that the Islamic establishment will not succumb to the Europeans’ policies,” he said.
Reflecting how seriously Tehran was taking the idea, Iran’s OPEC governor Mohammad Ali Khatibi told the ILNA news agency the country might choose to raise the issue at the next OPEC meeting.
Iran’s conservative-dominated parliament has previously shown it is ready to force the government to take action against what it sees as hostility from the West.
In November it voted to expel the British ambassador after London announced new sanctions ahead of other EU countries.
The day after that vote, radical Iranians stormed the British embassy, causing London to withdraw all staff and close the mission.
- Iran ‘definitely’ closing Strait of Hormuz over EU oil embargo (mb50.wordpress.com)
- Oil Surge Begins (mb50.wordpress.com)
- Iran threatens to stop Gulf oil if sanctions widened (mb50.wordpress.com)
- EU firms renew Iran oil deals to win sanction reprieve (mb50.wordpress.com)
- Oil-for-gold: Will Iran dodge US Sanctions with metal shield? (richardemanuel.wordpress.com)
- Futures Movers: Oil futures edge above $100 a barrel (marketwatch.com)
- Revenge for EU Sanctions: Iran Set to Turn Off Oil Supply to Europe – SPIEGEL ONLINE – News – International (worldwright.wordpress.com)
- Oil hovers near $100 amid Iran tensions (seattlepi.com)
- Iran says EU oil embargo will be ineffective (foxnews.com)
- Iran threatens to hit U.S. targets over Strait of Hormuz as Europe joins oil import ban (tribuneofthepeople.com)
- EU firms renew Iran oil deals to win sanction reprieve (mb50.wordpress.com)
- Japan agrees to cut dependency on Iranian oil as US scores significant coup against regime (telegraph.co.uk)
- EU split over Iran oil embargo (laaska.wordpress.com)
- Oil dips to near $101 as Iran embargo talks falter (mysanantonio.com)
- EU governments consider delay on any Iran oil ban – Reuters (reuters.com)
Peak oil theories over the last few years are now not in the spotlight that rules over oil prices this year as the new king of market movers, the “global economic uncertainty” looks set to be a game changer in the coming months ahead.
IEA Oil Report 2012
The latest Monthly Oil Market Report from the US IEA (International Energy Agency) forecasts the call on OPEC crude in 2012 at 30.2 million barrels per day. It also forecasts global oil demand will average 90.3 million barrels per day in 2012, an increase of 1.3 million over 2011.
However, the crude oil markets are expected to remain volatile throughout 2012, with the fundamentals of oil supply and demand continuing to take a back seat to the debt situation in Europe and tensions in the Middle East, with Iran in the driving seat.
“Given already very low European crude inventories, a spate of precautionary buying and escalating tensions surrounding the Iranian issue could sustain prompt prices at levels higher than otherwise, amid the growing concerns about the euro zone and weaker global economic activity for 2012.” the IEA said on 12th December.
Iran and Oil Supplies
Turning to oil supplies, the Iranian oil issue remains unclear, as the USA and its allies along with the EU are considering new sanctions on the Iranian oil as we know which increase fears that it will curb the oil supply, which will push oil prices to the upside strongly, and from the Iranian side, it said that if any sanctions happened, it will stop oil passing from the Strait of Hormuz.
Back to Europe which remained for the past year the main factor that drive global markets, as the crisis is deepening and contagion risks are appearing, where many negative consequences can be noticed, however, hopes increased at the beginning of the year that serious measures would be implemented to halt the crisis’ train.
US Dollar and Oil Prices
On the other hand, the US dollar is encouraging crude oil to continue this upside journey, as it declined at the beginning of the year due to different factors. The ICE US Dollar Index opened the session at 80.27 and recorded a high of 80.29 then it declined to reach so far a low of 79.88, and is currently trading around 79.95.
In general, trading volumes remain mightily low, which give space for any minor factor to affect crude heavily and give it momentum, where fluctuations may be evident ahead of the American data which may add positive signs for the world’s largest economy.
- Where is Oil Price Heading in 2012? (ibtimes.com)
- Peak oil review – Jan 2 (energybulletin.net)
- Iran threatens to stop Gulf oil if sanctions widened (mb50.wordpress.com)
- Peak Oil is a Myth (socyberty.com)
- IEA warns high oil prices threaten global economy (thehindu.com)
- Too many wild cards cloud 2012 oil price outlook (business.financialpost.com)
- Case for a sustained $100 oil price (investmentpostcards.com)
Yet ‘fracking,’ a crucial part of shale gas extraction, is considered dangerous and many fear its impact on the environment. In the EU, member states are diverging significantly in national policy responses to shale gas regulation.
Where does shale come from? How can you cash-in on the shale boom? Why is fracking so controversial? A report from UK think tank The Global Warming Policy Foundation gives us a quick breakdown of everything you need to know about shale gas market.
- Shell ‘hits shale gas’ in China (mb50.wordpress.com)
- USA: Mitsui Closes Texas Shale Oil/Gas Deal (mb50.wordpress.com)
- Halliburton: Moving Quickly on the Global Shale Boom (mb50.wordpress.com)
- Greece Investigates Shale Gas (mb50.wordpress.com)
- Shale Gas Industry to Support 870,000 Jobs by 2015 (247wallst.com)
Submitted by Tyler Durden
Just as Europe seems destined to tip into recession and the US growth miracle decouples its reality from perceived global slowdowns, the oil market steps in to balance the equation. With WTI breaking $102 and Brent over $111 this morning, driven by Iran and Syria tensions, it would seem tough for a nation exporting its way to success, that is so dependent on both domestic consumer and energy to grow ‘as expected’ with energy premia so high – or perhaps the justification is the energy sector will carry the S&P through the next quarter as earnings expectations are cut. Nevertheless, as Reuters points out, the risk of supply disruptions remains high.
Reuters: Oil up near $111 on Iran supply risk concerns
Oil prices rose on Monday with Brent crude futures up near $111, extending last week’s gains as rising tensions between Iran and the West increased the risk of disruption to crude shipments by the world’s fifth-largest oil exporter.
Iran warned on Sunday that any move to block its oil exports would more than double crude prices with devastating consequences for a fragile global economy.
Brent crude was up $1.14 at $111.08 a barrel by 1313 GMT, after last week posting a gain of more than 3 percent, its best weekly gain since mid-October. Earlier Brent had pushed to an intraday high of $111.22 a barrel.
U.S. crude was up 81 cents to $101.77 a barrel, having posted a gain of 4.3 percent last week.
Christopher Bellew, an oil trader with Jefferies Bache in London, said that worries about Iran and Syria were helping to buoy oil prices. “If Iranian exports were suspended that would be very significant as the market is tight already,” he said.
The European Union is considering a ban – already in place in the United States – on Iranian oil imports. The storming of the British Embassy in Tehran last week has opened the door for tougher action against Iran which is thought to be working on a nuclear bomb.
“The risk of disruptions to oil supplies remains high,” said Christophe Barret, global oil analyst at Credit Agricole CIB. An embargo on Iranian oil “would introduce severe disruption to refining in several EU countries” he said.
Barret added that speculation about possible military strikes on Iranian nuclear sites have helped to increase the risk premium on oil prices.
But on Friday, U.S. Defense Secretary Leon Panetta made one of his most extensive arguments to date against any imminent military action against Iran over its nuclear programme, saying he was convinced sanctions and diplomatic pressure were working.
Israel has called a nuclear-armed Iran a threat. Iran says it is enriching uranium for peaceful purposes.
In Syria, EU sanctions are already biting with Royal Dutch Shell shutting down its activities there.
On Monday, Gulfsands Petroleum said it was reviewing the impact of the latest EU sanctions against Syria on its production activities and its contracts with the Syrian government and the General Petroleum Corporation (GPC).
“Syria was exporting about 400,000 barrels per day at the start of the year and it is probably exporting nothing at the moment,” said Bellew.
Oil ministers from OPEC members Kuwait, Oman and Bahrain said that the market was well supplied, echoing similar comments by Qatar’s energy minister and the OPEC Secretary-General Abdullah al-Badri at the weekend.
OPEC will meet next week in Vienna, but with Iran holding the presidency of the OPEC conference until the end of the year, analysts do not expect much from the meeting. Iran is OPEC’s second-largest producer.
- Oil to hit $250 if new Iran sanctions applied: MP (dailystar.com.lb)
- Iran says oil would go over $250 if exports banned (windsorstar.com)
- Iranian Sanctions Will Push Oil Over $250 (forbes.com)
- U.S. tightens screws on Iran oil exports, banking (sfgate.com)
- Oil rises to near $102 as Iran tensions rise (seattlepi.com)
- Oil rises above $101 as Iran tensions rise (seattletimes.nwsource.com)