Once an American enemy, now a friend: OPEC is 60 years old

LONDON (Reuters) – In 1973, Arab members of the Organization of Petroleum Exporting Countries brought the U.S. economy to its knees. Now, the 60-year-old cartel and Washington Washington are more likely to bid.

File photo: Crown Prince Mohammed bin Salman of Saudi Arabia shakes hands with US President Donald Trump at the G20 Leaders Summit in Osaka, Japan on June 29, 2019. Third party / file provided by photo

Changes in global politics and an increase in US oil production have fueled the group as Saudi Arabia and other Arab OPEC members imposed their famous oil embargo in exchange for US support for Israel during the Yom Kippur War.

OPEC’s top hockey members, Iran and Venezuela, have been overtaken by US sanctions, while Saudi Arabia’s Kingpin shows it will please Washington instead of losing American support.

The OPEC group’s record over the past three years, especially during the 2011 uprising against Libya’s Muammar Gaddafi, has been a major one as it resists US pressure to reduce oil prices for decades, officials say.

Seven U.S. And set up in Baghdad on September 14, 1960, to counter the power of British oil companies, OPEC and Washington have been repeatedly pressured by Washington to push for oil since US President Donald Trump took office in early 2017.

Trump has regularly called for lower gasoline prices to help U.S. consumers.

And when the U.S. Drilling companies have had prices too low to make money this year when OPEC struck a deal to reduce military support for Riyadh and bring them back slightly in an agreement reached through Washington’s threat, sources told Reuters. reut.rs/3m4gBSr

“Trump has ordered from Saudi Arabia what he wants for oil prices – and he is being served,” Chakib Khelil, Algeria’s oil minister for a decade and president of OPEC in 2001 and 2008, told Reuters. “So OPEC has really changed.”

The Saudi Ministry of Energy declined to comment.

The White House declined to comment.

Reuters asked a third of the group’s output, as well as analysts, traders and investors, whether the U.S. should focus on Iran and Venezuela. How the sanctions affected Saudi Arabia’s influence within OPEC, and whether it had changed dynamically with Washington.

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

US output source

For decades, Saudi Arabia has been an OPEC producer with the greatest influence on policy, but only on the side of Iran and Venezuela.

According to Reuters estimates based on OPEC figures, Iran’s share of OPEC output has fallen by about 5 per cent since 2010, while Venezuela has fallen from about 10 per cent to 4.3 per cent. Meanwhile, Saudi Arabia’s share has risen 7 percentage points to 35%.

Iran and Venezuela, the founders of OPEC along with Iraq, Kuwait and Saudi Arabia, have regularly opposed any move to bring down oil prices in the face of US pressure.

OPEC The growing dominance of Saudi Arabia in the U.S. The time has come for higher oil and gas production, which has made the United States the world’s largest oil producer and reduced its dependence on foreign fuels.

U.S. production will more than double in a decade to reach 12 million barrels a day in 2019, according to the Energy Information Administration, as improved drilling technology has made previously uploaded basins accessible.

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

OPEC formed a group called OPEC + in 2016 with Russia and nine other oil producers to boost their collective profits, but a senior Trump administration official said the new group’s influence has also waned as US output has increased.

‘OPEC IT ATN again’

Trump has been more actively involved with OPEC than his predecessor, often taken to Twitter to comment on product decisions and oil price moves.

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

Gary Ross, founder of Black Gold Investors and an OPEC expert, said the U.S. administration has never been more involved in international oil policy and OPEC than Trump.

In 2018, when oil prices reached above ડ 70 a barrel, which was too high for American consumers in Washington, Trump fired a barrage of tweets at the cartel.

“Oil prices are very high, OPEC is on it again. Not good! “He tweeted on June 13, 2018, nine days before the OPEC meeting. As OPEC gathered in Austria on June 22, Trump wrote:” Hopefully OPEC will significantly increase output. Prices need to be reduced! “

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

Two OPEC officials, who declined to be identified because of the sensitivity of the issue, said Trump’s intervention on oil prices effectively forces the organization to discuss or adjust its production policy.

And Trump’s Twitter feed has caused concern.

A top OPEC official told Reuters on April 9, 2019 that oil prices had reached $ 71 a barrel, a five-month high at the time.

Oil market observers, including OPEC officials, say the trend is that price increases in 2018 and 2019 were both mainly due to Washington’s sanctions on Iran and Venezuela – policies that reduced daily oil production by about 3 million barrels.

Graphic: OPEC market share 2010 and 2020

Great for the industry!

Earlier this year, Trump wanted something new from OPEC: U.S. Production cuts to help oil companies make money.

Oil prices fell due to a supply glitch caused by a price war between Saudi Arabia and Russia as demand fell due to a global coronavirus lockdown.

“Just spoke to my friend MBS (Crown Prince) from Saudi Arabia, who spoke to Russian President Putin, and I expect and hope that they will cut about 10 million barrels, and if that happens, more oil and Be great for the gas industry! Trump tweeted April 2.

On April 12, OPEC + agreed for a record cut in production with the 10th equivalent of global output.

Reuters reported on April 30 that Trump had issued an ultimatum to Bin Salman: the risk of cutting off production or withdrawing U.S. troops from the state.

Asked about the ultimatum at the time, Trump said: “I didn’t need to tell them.” He spoke to MBS by phone and said they were able to reach a deal on production cuts.

Saudi Arabia’s state media office did not respond to a request for comment in an April report.

“In sum, OPEC does not decide what is best for its members economically, as it is considered in accordance with its law,” said Kheliel of Algeria.

Graphic: OPEC crude output and U.S. Oil supply as% of world total

‘Gift to Trump’

In 2011, when Libya’s output was hit by an uprising against Gaddafi, Saudi Arabia tried to persuade OPEC to lower production. But Algeria, Angola, Ecuador, Iran, Iraq, Libya and Venezuela all resisted.

“Previously, you had a group that could be quite vocal and really move meetings forward,” said Samuel Sizuk, who founded the consultancy ELS Analysis and worked for the Swedish Energy Agency.

“Now, Iran and Venezuela still have votes but they have fallen apart and there are so many economic and marketing conditions that other countries are more wary of joining them politically.”

Former OPEC governor Hussein Kazampor Ardebili told Reuters in 2018 that when OPEC + only increased output following Trump’s pressure, both OPEC and the wider group began to act against the interests of their younger members.

“They gave Trump the price of oil as a revenue loss to all OPEC members,” he said.

While there is no indication that OPEC is preparing to suffer the loss of smaller members as a result of migration dynamics – and there have been new entrants – some countries remain.

Qatar stepped down in 2019, partly due to political tensions with Riyadh. Another small producer, Ecuador, left this year and left Indonesia in 2016. Both said they did not want to be hampered by OPEC’s production quota.

Others who may be unhappy with OPEC’s path, however, plan to stay what they can.

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

Additional reporting by Dmitry Zdannikov, Bozorgmer Sharafedin and Marianna Paraga; Edited by Richard Waldmanis and David Clark