Is OPEC ready to face tough time?

OPEC and its allies may celebrate their success in buoying world oil markets, but the coalition will soon be faced with some tough choices. Russia has already expressed fears that high prices will facilitate US shale comeback and Iran could revive exports, if it succeeds in improving relations with the United States.

Oil prices extended gains on Thursday after the OPEC alliance decided to stick to a reduced output policy. There was another blessing as crude stockpiles in the United States fell to their lowest levels, since March last year. Brent were traded at US$58.97/barrel, by 0741 GMT and West Texas Intermediate (WTI) futures were traded at US$56.22, after reaching its highest settlement level in a year on Wednesday.

Last month’s pledge by Saudi Arabian Energy Minister Prince Abdulaziz bin Salman to slash production by a further one million barrels a day has supported global markets against the latest onslaught from the pandemic.

While that relieves OPEC+ of any need to adjust its policy, it’ll need to start considering how long to restrain output -- a calculation clouded by the potential return of supply from Iran.

At the heart of the dilemma is a fundamental tension between the Saudis and their most critical partner in the alliance, Russia. While Riyadh has sought higher prices to cover government spending, Moscow will certainly try to maintain its market share.

“Prince Abdulaziz bin Salman’s doctrine that you err on the side of caution has been vindicated,” said Helima Croft, chief commodities strategist at RBC Capital Markets LLC. “We might get the contours of the arguments that will be made next month.”

OPEC and its partners have resolved this year to restore some of the 7.2 million barrels of daily output, roughly 7% of global supplies, they continue to idle after making vast production cuts when the pandemic erupted last spring.

The restrictions have proved effective, turning around an oil market that in April 2020 briefly saw prices plunge below zero in New York, and throwing a financial lifeline to producers around the world, from tiny African states to corporate giants.

Restoring the halted production, however, is turning out to be a delicate process.

OPEC+ is scheduled to revive a total of 2 million barrels a day this year; it agreed a two-month pause after the first 500,000 barrel installment in January as new virus infections menaced fuel demand. Riyadh doubled down on the curbs by announcing an extra one million-barrel cutback of its own.

The panel that oversees the alliance’s strategy, the Joint Ministerial Monitoring Committee, will convene online to assess the outlook. The JMMC is unlikely to recommend new policies, which will instead be tackled at the next full OPEC+ meeting in early March, according to delegates who asked not to be identified.

“The Saudi cut has bought OPEC+ some time,” said Bill Farren-Price, a director at research firm Enverus and veteran observer of the cartel. The question of what to do next will loom over their discussions on Wednesday.

Russia on the other hand fears that supporting prices too long will backfire, provoking investment in US shale oil and a flood of new supply that will negate OPEC+’s hard work. At last month’s meeting, Deputy Prime Minister Alexander Novak proposed a production increase, and tried to dissuade the Saudi Prince from his unilateral cut.

 “It is going to be a hell of fight at the OPEC+ March meeting,” said Helge Andre Martinsen, senior oil market analyst at DNB Bank ASA. “Russia will consider it a massive failure if OPEC+ cuts starts to stimulate growth in US shale again, while at the same time they’re sitting on plenty of spare capacity.”

Russia isn’t the only member that might push for relaxing the curbs. Iraq is in the grip of an economic crisis and desperately needs the revenues that would come from higher oil sales. The United Arab Emirates is seeking to promote a benchmark oil contract that depends on plentiful output, and last year briefly broke ranks with Riyadh to open the taps.

Then there’s the complication of Iran. President Joe Biden is seeking to reactivate a nuclear agreement that would lift US sanctions on the Islamic Republic, allowing the return of almost 2 million barrels of daily output. With the end of the “maximum pressure” campaign waged by former President Donald Trump, Iranian exports have already crept higher.

Still, Secretary of State Antony Blinken says an agreement remains a “long way” off. As the two sides jockey for leverage -- and Tehran presses on with uranium enrichment -- they could be headed for a new rupture rather than reconciliation, according to RBC’s Croft. Instead of extra barrels, markets may need to brace for “a geopolitical tremor,” she cautions.

But if a deal is struck, OPEC+ will need to choose between cutting output further, or seeing their efforts to drain surplus oil stockpiles founder. It is unclear how readily Saudi Arabia would make way for the comeback of its political nemesis.

Yang Jiechi warns United States to stop meddling in Chinese internal affairs

Yang Jiechi, Director, Central Foreign Affairs Commission of the Chinese Communist Party has called Beijing and Washington to put relations back on a predictable and constructive path, saying the United States should stop meddling in China's internal affairs, Hong Kong and Tibet.

Yang Jiechi is the highest ranking Chinese leader to speak on Sino-US relations since President Joe Biden took office.

Under the Trump administration, the US relations with China plunged to their lowest point since the establishment of diplomatic ties in 1979, as both sides clashed over issues ranging from trade and technology to Hong Kong, Taiwan and Xinjiang, and the South China Sea.

While reassuring the United States that China has no intention to challenge or replace the US position in the world, Yang stressed that no force can hold back China's development.

"The United States should stop interfering in Hong Kong, Tibet, Xinjiang and other issues regarding China's territorial integrity and sovereignty," Yang said, defining these as issues concerning China's core interests and national dignity.

Speaking at an online forum organized by the National Committee on US-China Relations in Beijing, Yang said China never meddles with US internal affairs, including its elections.

Yang, whose position in the ruling Communist Party gives him more influence than even the Foreign Minister, also urged the Biden administration not to abuse the concept of national security in trade.

"We in China hope that the United States will rise above the outdated mentality of zero-sum, major-power rivalry and work with China to keep the relationship on the right track," he said.

Yang reasserted that China is prepared to work with the United States to move the relationship forward along a track of "no conflict, no confrontation, mutual respect and win-win cooperation."

The word "cooperation" appeared 24 times in his speech. He suggested that US firms could gain from an estimated US$22 trillion worth of exports to China in the coming decade.

Bangladesh rejects Al Jazeera report

Reportedly, Bangladesh has dismissed Al Jazeera news channel’s Monday’s report titled “All the Prime Minister’s Men” calling it as “false and defamatory” and a desperate “smear campaign” instigated by extremists and their allies, working in London and elsewhere.

“The report is nothing more than a misleading series of innuendos and insinuations in what is apparently a politically motivated “smear campaign” by notorious individuals associated with the Jamaat-e-Islami extremist group,” a foreign ministry statement said here today.

The Jamaat-i-Islami extremist group has been opposing the progressive and secular principles of Bangladesh since its very birth as an independent nation in 1971, it added.

The foreign ministry said Dhaka regrets that Al Jazeera had allowed itself to become an instrument for their malicious political designs aimed at destabilizing the secular democratic government of Bangladesh with a proven track record of extraordinary socio-economic development and progress.

The statement noted that the main “source” of Al Jazeera’s allegations is an alleged international criminal claimed to be a “psychopath” by Al-Jazeera itself.

“There is not a shred of evidence linking the prime minister and other state institutions of Bangladesh to this particular individual, and it is highly irresponsible for an international news channel to draw conclusions on the basis of the words of a mentally unstable person,” said the statement.

Pointing that the report’s historical account failed to even mention the horrific genocide in 1971, in which Jamaat perpetrators killed millions of Bengali civilians and raped more than two hundred thousand Bengali women, the statement said, this is the reflection of the political bias in Al Jazeera’s coverage.

It also noticed that the principal commentator of the report David Bergman was convicted by International Crimes Tribunal Bangladesh for challenging the official death toll of 1971 Liberation War.

“It is also not surprising that the report aligns with the string of anti-Bangladesh propaganda habitually orchestrated by a few convicted absconding criminals and discredited individuals patronized by Jamaat-e-Islami Bangladesh, which on certain occasions have conspired with international extremist groups and news media specially the Al Jazeera,” said the statement.

 

 

Nuclear weapons are in contradiction to our ideological views, says Zarif

If Iran wanted a nuclear weapon it would have built one already, Iran’s Foreign Minister Javad Zarif said in an interview with CNN published on Tuesday. 

"If we wanted to build a nuclear weapon we could have done it some time ago," Zarif told Christiane Amanpour. "But we decided that nuclear weapons are not, would not augment our security and are in contradiction to our, eh, ideological views. And that is why we never pursued nuclear weapons."

On Monday, US Secretary of State Antony Blinken told NBC that if Iran violated additional restrictions included in the 2015 nuclear deal it could obtain enough fissionable material for a bomb within "a matter of weeks". 

Zarif said that the uranium enriched by the Islamic Republic could immediately be scaled back to comply with the nuclear deal if the US lifts sanctions. "Eight thousand pounds of enriched uranium can go back to the previous amount in less than a day,” he claimed. 

The Biden administration, the Iranian foreign minister said, had a "limited window of opportunity" to re-enter the 2015 nuclear agreement.

"The time for the United States to come back to the nuclear agreement is not unlimited," he said. "The United States has a limited window of opportunity, because President Biden does not want to portray himself as trying to take advantage of the failed policies of the former Trump administration."

Zarif sketched out the path to overcome the impasse saying the EU foreign policy chief could "choreograph" the moves.

"There can be a mechanism to basically either synchronize it or coordinate what can be done," Zarif told CNN when asked in an interview how to bridge the gap between Washington and Tehran. Each government wants the other to resume compliance first.

Zarif noted the agreement created a Joint Commission coordinated by the European Union foreign policy chief, now Josep Borrell. Borrell "can ... sort of choreograph the actions that are needed to be taken by the United States and the actions that are needed to be taken by Iran," Zarif told CNN.

The Commission includes Iran and the six other parties to the deal that were Britain, China, France, Germany, Russia and the United States.