If the world wants to control the ongoing climate crisis, the vast majority of fossil fuel reserves owned by developed countries and companies should remain in the ground, an analysis has claimed.

A group of researchers have described the climate change situation to be "absolutely desperate" and have said that 90 per cent of coal and 60 per cent of oil and gas reserves could not be extracted if there is even some chance of keeping global heating below 1.5 C.

This research has highlighted the gap between the reality of the situation and the goals set by world leaders in the Paris Agreement.

Also read |&nbsp;<a href="https://www.wionews.com/science/as-earth-warms-up-animals-are-shape-shifting-to-survive-better-study-411890" hreflang="en">As Earth warms up, animals are 'shape-shifting' to survive better: Study</a>

"The (analysis) implies that many operational and planned fossil fuel projects (are) unviable,"&nbsp;the scientists said.

Experts have said that the new plans of fossil fuel industry make sense only if the leaders and countries believe that the oil, gas and coal production has already peaked and a decline of three per cent will now be commencing.

They also warned that countries who rely heavily on fossil fuel revenue, such as Saudi Arabia and Nigeria, are the ones who will be at greater risk.

Also read |&nbsp;<a href="https://www.wionews.com/science/this-shark-toothed-dinosaur-gave-tough-competition-to-t-rex-411826" hreflang="en">This 'shark-toothed' dinosaur gave tough competition to T-Rex</a>

The analysis has stated that US, Russia and the former Soviet states will have to keep 97 per cent of coal reserves in the ground to make sure the temperature stays below 2.5 C, while China will have to keep 76 per cent in the ground.

Similarly, all Middle Eastern states should keep two-thirds oil reserves on ground and Canada should keep 83 per cent oil from tar sands should be left untouched.

"It is absolutely desperate," said Prof. Paul Ekins of University College London, and one of the research team. "We are nowhere near the Paris target in terms of the fossil fuels people are planning to produce."

(With inputs from agencies)

If the world wants to control the ongoing climate crisis, the vast majority of fossil fuel reserves owned by developed countries and companies should remain in the ground, an analysis has claimed.

If the world wants to control the ongoing climate crisis, the vast majority of fossil fuel reserves owned by developed countries and companies should remain in the ground, an analysis has claimed. A group of researchers have described the climate change situation to be "absolutely desperate" and have said that 90 per cent of coal and 60 per cent of oil and gas reserves could not be extracted if there is even some chance of keeping global heating below 1.5 C. This research has highlighted the gap between the reality of the situation and the goals set by world leaders in the Paris Agreement. Also read | As Earth warms up, animals are 'shape-shifting' to survive better: Study "The (analysis) implies that many operational and planned fossil fuel projects (are) unviable," the scientists said. Experts have said that the new plans of fossil fuel industry make sense only if the leaders and countries believe that the oil, gas and coal production has already peaked and a decline of three per cent will now be commencing. They also warned that countries who rely heavily on fossil fuel revenue, such as Saudi Arabia and Nigeria, are the ones who will be at greater risk. Also read | This 'shark-toothed' dinosaur gave tough competition to T-Rex The analysis has stated that US, Russia and the former Soviet states will have to keep 97 per cent of coal reserves in the ground to make sure the temperature stays below 2.5 C, while China will have to keep 76 per cent in the ground. Similarly, all Middle Eastern states should keep two-thirds oil reserves on ground and Canada should keep 83 per cent oil from tar sands should be left untouched. "It is absolutely desperate," said Prof. Paul Ekins of University College London, and one of the research team. "We are nowhere near the Paris target in terms of the fossil fuels people are planning to produce." (With inputs from agencies)

Majority of fossil fuels should 'remain in ground' to fight climate change crisis

OPEC, Russia and allies agreed on Saturday to extend record oil production cuts until the end of July, prolonging a deal that has helped crude prices double in the past two months by withdrawing almost 10% of global supplies from the market.

The group, known as OPEC+, also demanded countries such as Nigeria and Iraq, which exceeded production quotas in May and June, compensate with extra cuts in July to September.

OPEC+ had initially agreed in April that it would cut supply by 9.7 million barrels per day (bpd) during May-June to prop up prices that collapsed due to the coronavirus crisis. Those cuts were due to taper to 7.7 million bpd from July to December.

"Demand is returning as big oil-consuming economies emerge from pandemic lockdown. But we are not out of the woods yet and challenges ahead remain," Saudi Energy Minister Prince Abdulaziz bin Salman told the video conference of OPEC+ ministers.

Benchmark Brent crude climbed to a three-month high on Friday above $42 a barrel, after diving below $20 in April. Prices still remain a third lower than at the end of 2019.

"Prices can be expected to be strong from Monday, keeping their $40 plus levels," said Bjornar Tonhaugen from Rystad Energy.

Saudi Arabia, OPEC`s de facto leader, and Russia have to perform a balancing act of pushing up oil prices to meet their budget needs while not driving them much above $50 a barrel to avoid encouraging a resurgence of rival U.S. shale production.

It was not immediately clear whether Saudi Arabia, the United Arab Emirates and Kuwait would extend beyond June their additional, voluntary cuts of 1.18 million bpd, which are not part of the deal.

BULGING INVENTORIES

The April deal was agreed under pressure from U.S. President Donald Trump, who wants to avoid U.S. oil industry bankruptcies.

Trump, who previously threatened to pull U.S. troops out of Saudi Arabia if Riyadh did not act, spoke to the Russian and Saudi leaders before Saturday`s talks, saying he was happy with the price recovery.

While oil prices have partially recovered, they are still well below the costs of most U.S. shale producers. Shutdowns, layoffs and cost cutting continue across the United States.

"I applaud OPEC-plus for reaching an important agreement today which comes at a pivotal time as oil demand continues to recover and economies reopen around the world," U.S. Energy Secretary Dan Brouillette wrote on Twitter after the extension.

As global lockdowns ease, oil demand is expected to exceed supply sometime in July but OPEC has yet to clear 1 billion barrels of excess oil inventories accumulated since March.

Rystad`s Tonhaugen said Saturday`s decisions would help OPEC reduce inventories at a rate of 3 million to 4 million bpd in July-August. "The quicker stocks fall, the higher prices will get," he said.

Nigeria`s petroleum ministry said Abuja backed the idea of compensating for its excessive output in May and June.

Iraq, with one of the worst compliance rates in May, agreed to extra cuts although it was not clear how Baghdad would reach agreement with oil majors on curbing Iraqi output.

Iraq produced 520,000 bpd above its quota in May, while overproduction by Nigeria was 120,000 bpd, Angola`s was 130,000 bpd, Kazakhstan`s was 180,000 bpd and Russia`s was 100,000 bpd, OPEC+ data showed.

OPEC+`s joint ministerial monitoring committee, known as the JMMC, will meet monthly until December to review the market, compliance and recommend levels of cuts. JMMC`s next meeting is scheduled for June 18.

OPEC and OPEC+ will hold their next scheduled meetings on Nov. 30-Dec. 1.

OPEC, Russia and allies agreed on Saturday to extend record oil production cuts until the end of July, prolonging a deal that has helped crude prices double in the past two months by withdrawing almost 10% of global supplies from the market.

OPEC, Russia and allies agreed on Saturday to extend record oil production cuts until the end of July, prolonging a deal that has helped crude prices double in the past two months by withdrawing almost 10% of global supplies from the market. The group, known as OPEC+, also demanded countries such as Nigeria and Iraq, which exceeded production quotas in May and June, compensate with extra cuts in July to September. OPEC+ had initially agreed in April that it would cut supply by 9.7 million barrels per day (bpd) during May-June to prop up prices that collapsed due to the coronavirus crisis. Those cuts were due to taper to 7.7 million bpd from July to December. "Demand is returning as big oil-consuming economies emerge from pandemic lockdown. But we are not out of the woods yet and challenges ahead remain," Saudi Energy Minister Prince Abdulaziz bin Salman told the video conference of OPEC+ ministers. Benchmark Brent crude climbed to a three-month high on Friday above $42 a barrel, after diving below $20 in April. Prices still remain a third lower than at the end of 2019. "Prices can be expected to be strong from Monday, keeping their $40 plus levels," said Bjornar Tonhaugen from Rystad Energy. Saudi Arabia, OPEC`s de facto leader, and Russia have to perform a balancing act of pushing up oil prices to meet their budget needs while not driving them much above $50 a barrel to avoid encouraging a resurgence of rival U.S. shale production. It was not immediately clear whether Saudi Arabia, the United Arab Emirates and Kuwait would extend beyond June their additional, voluntary cuts of 1.18 million bpd, which are not part of the deal. BULGING INVENTORIES The April deal was agreed under pressure from U.S. President Donald Trump, who wants to avoid U.S. oil industry bankruptcies. Trump, who previously threatened to pull U.S. troops out of Saudi Arabia if Riyadh did not act, spoke to the Russian and Saudi leaders before Saturday`s talks, saying he was happy with the price recovery. While oil prices have partially recovered, they are still well below the costs of most U.S. shale producers. Shutdowns, layoffs and cost cutting continue across the United States. "I applaud OPEC-plus for reaching an important agreement today which comes at a pivotal time as oil demand continues to recover and economies reopen around the world," U.S. Energy Secretary Dan Brouillette wrote on Twitter after the extension. As global lockdowns ease, oil demand is expected to exceed supply sometime in July but OPEC has yet to clear 1 billion barrels of excess oil inventories accumulated since March. Rystad`s Tonhaugen said Saturday`s decisions would help OPEC reduce inventories at a rate of 3 million to 4 million bpd in July-August. "The quicker stocks fall, the higher prices will get," he said. Nigeria`s petroleum ministry said Abuja backed the idea of compensating for its excessive output in May and June. Iraq, with one of the worst compliance rates in May, agreed to extra cuts although it was not clear how Baghdad would reach agreement with oil majors on curbing Iraqi output. Iraq produced 520,000 bpd above its quota in May, while overproduction by Nigeria was 120,000 bpd, Angola`s was 130,000 bpd, Kazakhstan`s was 180,000 bpd and Russia`s was 100,000 bpd, OPEC+ data showed. OPEC+`s joint ministerial monitoring committee, known as the JMMC, will meet monthly until December to review the market, compliance and recommend levels of cuts. JMMC`s next meeting is scheduled for June 18. OPEC and OPEC+ will hold their next scheduled meetings on Nov. 30-Dec. 1.

OPEC, Russia extend record oil cuts to end of July

The United States faces a stark choice in the Middle East if it continues its maximum pressure campaign against Iran: confront the Islamic republic militarily or withdraw from the region.

Trita Parsi, Executive Vice President of the Quincy Institute in Washington and a former head of the National Iranian American Council, recently drew that harsh conclusion. No doubt, Parsi may be correct in the ultimate analysis. US-Iranian tensions could easily spin out of control into an all-out war that neither Iran nor the United States wants.

There are, however, lots of shades of grey that separate long-standing tit-for-tat attacks on US targets – primarily in Iraq, occasional Iranian harassment of US naval vessels in the Gulf, and sporadic US responses, from all-out war.

The United States and Iran have been engaged in tit-for-tat with varying degrees of intensity for years and so far have avoided an uncontrolled escalation despite incidents such as the 1988 downing of Iran Air flight 655, that killed 274 people, and the targeted assassination earlier this year of Iranian General Qasem Soleimani.

Leaving aside potential black and grey swans, a more likely scenario is that a US desire to reduce its commitment to Gulf states, increased Gulf doubts about US reliability as a regional security guarantor, and a new world in which Gulf and Western states struggle to come to grips with the economic fallout of the coronavirus pandemic, create an environment more conducive to a multilateral security arrangement. One that would reduce the risk of war, even if multilateralism globally seems to be on the retreat.

US President Donald Trump’s threat in early April to cut off military sales to Saudi Arabia, if the kingdom did not bury the hatchet in its oil price war with Russia – sparking the collapse of oil markets, is an inevitable epic battle for market share.

More immediately, it drove the message home in Riyadh that US security guarantees were conditional and reinforced Saudi perceptions that the United States was getting disproportionately more out of its close ties to the kingdom than Saudi Arabia.

The Trump administration, in a little-noticed sign of the times, put Saudi Arabia in late April on a priority watch list for violations of intellectual property rights because of its pirating of sports broadcasting rights owned by Qatar’s beIN television franchise. The listing threatened to complicate Saudi Arabia’s already controversial bid to acquire English soccer club Newcastle United.

It is still too early to assess the geopolitical impact of the global economic downturn. Depressed demand and pricing for oil and gas could enable China to diversify its sourcing and potentially reduce its dependence on the Middle East, a volatile region with heightened security risks. China imported 31 per cent more oil from Russia last month while its intake of Saudi crude slipped by 1.8 per cent compared to March 2019.

At the same time, low oil prices that make US production commercially less viable could temporarily increase Washington’s interest in Gulf security.

Fundamentally, and irrespective of what scenario plays out, little will change. The US will still want to reduce its exposure to the Middle East. For its part, China will still need to secure oil and gas supplies as well as its investments and significant diaspora community in the region while seeking to avoid being sucked into intractable regional conflicts.

By the same token, the gradual revival of economic life, including a probable phased revitalisation of supply chains and international travel, combined with a need to rethink migrant worker housing and create local employment, could alter Middle Eastern perspectives of China’s way of doing business.

China’s Belt-and-Road projects often have a China-wins-twice aspect to them that may have always been problematic but have become even more so in a post-pandemic economic environment. China-funded projects rely by and large on Chinese labour and materials supply rather than local sourcing.

The People’s Republic’s “China First” approach extends beyond economics and commerce. In an environment in which the United States is an irreplaceable but unreliable partner, Gulf states may look differently at Chinese hesitancy to co-shoulder responsibility for regional security with the risk of having to involve itself in multiple conflicts it has so far been able to stay aloof from.

The coronavirus pandemic constitutes a watershed that will colour Middle Eastern attitudes towards all of the region’s foremost external players: the United States, China, and Russia. Prior to the crisis, Russia, the weakest of the three, was playing a weak economic hand well, but may find that more difficult going forward.

Gulf states are likely to conclude that assertive go-it-alone policies are risky and only work in specific circumstances where big powers are either part of the ploy or look the other way. Though such were easier to pursue in a stable economic environment in which their oil and gas revenue base appeared secure.

The United Arab Emirates appears to have read the writing on the wall. It began a year ago to hedge its bets by reaching out to Iran in a bid to ensure that it would not become a theatre of war if US-Iranian tensions were to spin out of control. Still, that has not stopped its support for rebel forces in Libya led by renegade Field Marshall Khalifa Haftar in violation of an international arms embargo.

Trump’s threat of a cut-off in military sales to Saudi Arabia should have driven the point home. Yet, financially and economically weakened, less able to play big powers off against one another, and deprived of any viable alternative options, the kingdom and other Gulf states may find that a multilateral security arrangement that incorporates rather than replaces the United States’ regional defence umbrella is the only security straw they can hold on to.

Nevertheless, in eventually attempting to negotiate a new arrangement, they may also find that they no longer have the kind of leverage they had prior to a pandemic that in many ways has pulled the rug from beneath them.

&nbsp;(First published <a href="https://insidearabia.com/gulf-security-arab-gulf-states-have-no-good-options/">on Inside Arabia</a>)

(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)

The United States faces a stark choice in the Middle East if it continues its maximum pressure campaign against Iran: confront the Islamic republic militarily or withdraw from the region.

The United States faces a stark choice in the Middle East if it continues its maximum pressure campaign against Iran: confront the Islamic republic militarily or withdraw from the region. Trita Parsi, Executive Vice President of the Quincy Institute in Washington and a former head of the National Iranian American Council, recently drew that harsh conclusion. No doubt, Parsi may be correct in the ultimate analysis. US-Iranian tensions could easily spin out of control into an all-out war that neither Iran nor the United States wants. There are, however, lots of shades of grey that separate long-standing tit-for-tat attacks on US targets – primarily in Iraq, occasional Iranian harassment of US naval vessels in the Gulf, and sporadic US responses, from all-out war. The United States and Iran have been engaged in tit-for-tat with varying degrees of intensity for years and so far have avoided an uncontrolled escalation despite incidents such as the 1988 downing of Iran Air flight 655, that killed 274 people, and the targeted assassination earlier this year of Iranian General Qasem Soleimani. Leaving aside potential black and grey swans, a more likely scenario is that a US desire to reduce its commitment to Gulf states, increased Gulf doubts about US reliability as a regional security guarantor, and a new world in which Gulf and Western states struggle to come to grips with the economic fallout of the coronavirus pandemic, create an environment more conducive to a multilateral security arrangement. One that would reduce the risk of war, even if multilateralism globally seems to be on the retreat. US President Donald Trump’s threat in early April to cut off military sales to Saudi Arabia, if the kingdom did not bury the hatchet in its oil price war with Russia – sparking the collapse of oil markets, is an inevitable epic battle for market share. More immediately, it drove the message home in Riyadh that US security guarantees were conditional and reinforced Saudi perceptions that the United States was getting disproportionately more out of its close ties to the kingdom than Saudi Arabia. The Trump administration, in a little-noticed sign of the times, put Saudi Arabia in late April on a priority watch list for violations of intellectual property rights because of its pirating of sports broadcasting rights owned by Qatar’s beIN television franchise. The listing threatened to complicate Saudi Arabia’s already controversial bid to acquire English soccer club Newcastle United. It is still too early to assess the geopolitical impact of the global economic downturn. Depressed demand and pricing for oil and gas could enable China to diversify its sourcing and potentially reduce its dependence on the Middle East, a volatile region with heightened security risks. China imported 31 per cent more oil from Russia last month while its intake of Saudi crude slipped by 1.8 per cent compared to March 2019. At the same time, low oil prices that make US production commercially less viable could temporarily increase Washington’s interest in Gulf security. Fundamentally, and irrespective of what scenario plays out, little will change. The US will still want to reduce its exposure to the Middle East. For its part, China will still need to secure oil and gas supplies as well as its investments and significant diaspora community in the region while seeking to avoid being sucked into intractable regional conflicts. By the same token, the gradual revival of economic life, including a probable phased revitalisation of supply chains and international travel, combined with a need to rethink migrant worker housing and create local employment, could alter Middle Eastern perspectives of China’s way of doing business. China’s Belt-and-Road projects often have a China-wins-twice aspect to them that may have always been problematic but have become even more so in a post-pandemic economic environment. China-funded projects rely by and large on Chinese labour and materials supply rather than local sourcing. The People’s Republic’s “China First” approach extends beyond economics and commerce. In an environment in which the United States is an irreplaceable but unreliable partner, Gulf states may look differently at Chinese hesitancy to co-shoulder responsibility for regional security with the risk of having to involve itself in multiple conflicts it has so far been able to stay aloof from. The coronavirus pandemic constitutes a watershed that will colour Middle Eastern attitudes towards all of the region’s foremost external players: the United States, China, and Russia. Prior to the crisis, Russia, the weakest of the three, was playing a weak economic hand well, but may find that more difficult going forward. Gulf states are likely to conclude that assertive go-it-alone policies are risky and only work in specific circumstances where big powers are either part of the ploy or look the other way. Though such were easier to pursue in a stable economic environment in which their oil and gas revenue base appeared secure. The United Arab Emirates appears to have read the writing on the wall. It began a year ago to hedge its bets by reaching out to Iran in a bid to ensure that it would not become a theatre of war if US-Iranian tensions were to spin out of control. Still, that has not stopped its support for rebel forces in Libya led by renegade Field Marshall Khalifa Haftar in violation of an international arms embargo. Trump’s threat of a cut-off in military sales to Saudi Arabia should have driven the point home. Yet, financially and economically weakened, less able to play big powers off against one another, and deprived of any viable alternative options, the kingdom and other Gulf states may find that a multilateral security arrangement that incorporates rather than replaces the United States’ regional defence umbrella is the only security straw they can hold on to. Nevertheless, in eventually attempting to negotiate a new arrangement, they may also find that they no longer have the kind of leverage they had prior to a pandemic that in many ways has pulled the rug from beneath them. (First published on Inside Arabia) (Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)

Coronavirus will reshape security and political landscape of Middle East

The coronavirus pandemic and the global economic meltdown forced Saudi Arabia, the United Arab Emirates, the United States, and Russia to call time out in a war that was less about prices and more about market share and survival of the fittest. The agreement among producers to cut production by 10 million barrels a day amounts to a ceasefire that will likely end once economies recover and can again sustain the cost of war.

Saudi Arabia and the United Arab Emirates (UAE) risk jeopardising their relationship with the United States as a result of diverging interests that became evident with the eruption of the recent oil price war. That remains true even if the war was unsustainable in the midst of a devastating pandemic.

So far, Saudi Arabia has been the focus of US wrath at the kingdom’s perceived insensitivity and recklessness while the UAE has managed to fly under the radar despite it too declaring that it would increase production in support of the price war with Russia. The question is for how long the UAE can stay off the radar.

An immediate crisis has been averted with an agreement on Sunday, April 12 between members of the Organisation of Oil Exporting Countries (OPEC) and non-OPEC producers to cut production by some 10 million barrels a day.

But 13 US Republican Congressmen from oil-producing states put Saudi Arabia on notice in a two-hour phone call with Saudi Energy Minister Abdulaziz bin Salman a day after the agreement.

“The Saudis spent over a month waging war on American oil producers, all while our troops protected theirs.”

“While we appreciate them taking the first step toward fixing the problem they helped create, the Saudis spent over a month waging war on American oil producers, all while our troops protected theirs. That’s not how friends treat friends. Their actions were inexcusable and won’t be forgotten. Saudi Arabia’s next steps will determine whether our strategic partnership is salvageable,” said North Dakota Senator Kevin Cramer

The Congressmen’s notice reflected a deterioration of the kingdom’s relations with Congress over the past two years as well as US President Donald J Trump’s anger at the Saudi price war.

There is, however, a silver lining in the US-Saudi clash over oil prices even if it was suspended with the production cut agreement. The clash clarifies the parameters of the long-standing relationship between the two countries.

Eager to knock out the US shale industry, which accounts for some 10 million jobs, Saudi Arabia made clear that it would pursue its interests irrespective of US concerns or the fact that the world was in a massive economic downturn as the result of a pandemic.

“The Kingdom will . . . have to reduce its budgetary expenditures while wisely accessing its financial reserves for essential spending as it fights this potentially long-term battle of the fittest for market share in global energy,” said Ali Shihabi, a political analyst and former banker who often reflects Saudi thinking.

To accommodate sharply reduced revenues, the Saudi finance ministry has instructed government bodies to submit proposals to slash this year’s spending by up to 30 per cent, the economic consultancy Nasser Saidi and Associates said in a research note.

The US-Saudi clash has also laid bare the vulnerability of the US shale industry at a critical time. The ability of the United States to project itself as the world’s largest producer and exporter takes on added significance against the backdrop of a decline in US credibility reinforced by America’s inability to get a grip on the coronavirus crisis.

The irony is that US anger could have, just as well been, directed at the UAE, which was quick to declare its support of the Saudi move to drive prices below US shale’s breakeven point by flooding the market.

There’s “ample production capacity that will be quickly brought online given the current circumstances,” UAE Energy Minister Suhail Al Mazrouei said on March 11.

By putting Saudi Arabia, and by implication, the UAE on notice, the Congressmen were drawing battle lines for a renewed clash in the future that may have become even more inevitable as a result of the pandemic and its economic fallout.

With a likely reduction of the value of oil reserves and limited new gas stockpiles in the coming decades because of the rise of shale and renewables, Saudi Arabia needs to secure market share by capitalising on its low costs. Indeed, the kingdom has one of the world’s lowest costs of production of a barrel of oil.

The collapse in demand, low prices, and the global economic turndown increase the importance of market share. Saudi Arabia is likely to have to downsize its attention-grabbing big tickets like Neom – the futuristic city on the Red Sea, and focus on revenue and job-creating sectors.

“There’s a high likelihood (Neom) fades into nothingness. . . . The momentum will likely die out. And it will take a lot to rebuild that momentum,” said a Gulf-based economist.

In a sign of the times, JPMorgan was reportedly seeking to sell at a discount loans raised by the sovereign wealth funds of Saudi Arabia and the UAE as banks brace for a borrowing spree in the Gulf due to low oil prices.

Saudi Arabia may seek to create jobs and markets for its petrochemicals by developing plastics processing and chemicals.

Some economists suggest that Saudi Arabia and other oil producers may seek to create jobs and domestic and regional markets for their petrochemicals by pushing the development of plastics processing and chemicals.

Saudi Arabia hinted at a return to a focus on energy derivatives with the acquisition by its sovereign wealth fund of stakes worth roughly $1 billion in four major European oil companies—Equinor, Royal Dutch Shell, Total, and Eni.

“Managing heightened public expectations of the leadership will be crucial in maintaining public support for MbS when the pandemic subsides. The crisis is also a test for the progress made on Saudi Vision 2030, especially its programs to transform public services, reduce unemployment, and diversify the economy away from oil,” said Saudi Arabia scholar Yasmine Farouk.

Farouk was referring to Saudi Crown Prince Mohammed bin Salman by his initials and his Vision 2030 plan to lessen the kingdom’s dependence on oil revenues by diversifying its economy.

(Views expressed above are the personal views of the author and do not reflect the views of ZMCL)

(First published on <a href="https://insidearabia.com/us-saudi-oil-clash-sets-stage-for-future-epic-battle/">The Inside Arabia</a>)

The coronavirus pandemic and the global economic meltdown forced Saudi Arabia, the United Arab Emirates, the United States, and Russia to call time out in a war that was less about prices and more about market share and survival of the fittest.

The coronavirus pandemic and the global economic meltdown forced Saudi Arabia, the United Arab Emirates, the United States, and Russia to call time out in a war that was less about prices and more about market share and survival of the fittest. The agreement among producers to cut production by 10 million barrels a day amounts to a ceasefire that will likely end once economies recover and can again sustain the cost of war. Saudi Arabia and the United Arab Emirates (UAE) risk jeopardising their relationship with the United States as a result of diverging interests that became evident with the eruption of the recent oil price war. That remains true even if the war was unsustainable in the midst of a devastating pandemic. So far, Saudi Arabia has been the focus of US wrath at the kingdom’s perceived insensitivity and recklessness while the UAE has managed to fly under the radar despite it too declaring that it would increase production in support of the price war with Russia. The question is for how long the UAE can stay off the radar. An immediate crisis has been averted with an agreement on Sunday, April 12 between members of the Organisation of Oil Exporting Countries (OPEC) and non-OPEC producers to cut production by some 10 million barrels a day. But 13 US Republican Congressmen from oil-producing states put Saudi Arabia on notice in a two-hour phone call with Saudi Energy Minister Abdulaziz bin Salman a day after the agreement. “The Saudis spent over a month waging war on American oil producers, all while our troops protected theirs.” “While we appreciate them taking the first step toward fixing the problem they helped create, the Saudis spent over a month waging war on American oil producers, all while our troops protected theirs. That’s not how friends treat friends. Their actions were inexcusable and won’t be forgotten. Saudi Arabia’s next steps will determine whether our strategic partnership is salvageable,” said North Dakota Senator Kevin Cramer The Congressmen’s notice reflected a deterioration of the kingdom’s relations with Congress over the past two years as well as US President Donald J Trump’s anger at the Saudi price war. There is, however, a silver lining in the US-Saudi clash over oil prices even if it was suspended with the production cut agreement. The clash clarifies the parameters of the long-standing relationship between the two countries. Eager to knock out the US shale industry, which accounts for some 10 million jobs, Saudi Arabia made clear that it would pursue its interests irrespective of US concerns or the fact that the world was in a massive economic downturn as the result of a pandemic. “The Kingdom will . . . have to reduce its budgetary expenditures while wisely accessing its financial reserves for essential spending as it fights this potentially long-term battle of the fittest for market share in global energy,” said Ali Shihabi, a political analyst and former banker who often reflects Saudi thinking. To accommodate sharply reduced revenues, the Saudi finance ministry has instructed government bodies to submit proposals to slash this year’s spending by up to 30 per cent, the economic consultancy Nasser Saidi and Associates said in a research note. The US-Saudi clash has also laid bare the vulnerability of the US shale industry at a critical time. The ability of the United States to project itself as the world’s largest producer and exporter takes on added significance against the backdrop of a decline in US credibility reinforced by America’s inability to get a grip on the coronavirus crisis. The irony is that US anger could have, just as well been, directed at the UAE, which was quick to declare its support of the Saudi move to drive prices below US shale’s breakeven point by flooding the market. There’s “ample production capacity that will be quickly brought online given the current circumstances,” UAE Energy Minister Suhail Al Mazrouei said on March 11. By putting Saudi Arabia, and by implication, the UAE on notice, the Congressmen were drawing battle lines for a renewed clash in the future that may have become even more inevitable as a result of the pandemic and its economic fallout. With a likely reduction of the value of oil reserves and limited new gas stockpiles in the coming decades because of the rise of shale and renewables, Saudi Arabia needs to secure market share by capitalising on its low costs. Indeed, the kingdom has one of the world’s lowest costs of production of a barrel of oil. The collapse in demand, low prices, and the global economic turndown increase the importance of market share. Saudi Arabia is likely to have to downsize its attention-grabbing big tickets like Neom – the futuristic city on the Red Sea, and focus on revenue and job-creating sectors. “There’s a high likelihood (Neom) fades into nothingness. . . . The momentum will likely die out. And it will take a lot to rebuild that momentum,” said a Gulf-based economist. In a sign of the times, JPMorgan was reportedly seeking to sell at a discount loans raised by the sovereign wealth funds of Saudi Arabia and the UAE as banks brace for a borrowing spree in the Gulf due to low oil prices. Saudi Arabia may seek to create jobs and markets for its petrochemicals by developing plastics processing and chemicals. Some economists suggest that Saudi Arabia and other oil producers may seek to create jobs and domestic and regional markets for their petrochemicals by pushing the development of plastics processing and chemicals. Saudi Arabia hinted at a return to a focus on energy derivatives with the acquisition by its sovereign wealth fund of stakes worth roughly $1 billion in four major European oil companies—Equinor, Royal Dutch Shell, Total, and Eni. “Managing heightened public expectations of the leadership will be crucial in maintaining public support for MbS when the pandemic subsides. The crisis is also a test for the progress made on Saudi Vision 2030, especially its programs to transform public services, reduce unemployment, and diversify the economy away from oil,” said Saudi Arabia scholar Yasmine Farouk. Farouk was referring to Saudi Crown Prince Mohammed bin Salman by his initials and his Vision 2030 plan to lessen the kingdom’s dependence on oil revenues by diversifying its economy. (Views expressed above are the personal views of the author and do not reflect the views of ZMCL) (First published on The Inside Arabia)

US-Saudi oil clash sets the stage for future epic battle

Saudi Arabia’s oil spat with Russia throws a spanner into the works of the Kingdom’s long-standing effort to hedge its bets, a strategy that has taken on added significance as the Gulf comes to grips with the likelihood that the region’s security architecture will fundamentally change.

Saudi Arabia, despite a primary focus on close ties to the United States, has increasingly sought to put its eggs in multiple baskets by initially forging closer military and economic relations with Britain, France, and Germany, and more recently with Russia and China.

Saudi Arabia has increasingly sought to put its eggs in multiple baskets, forging closer military and economic relations with Russia and China.

The Saudi strategy, stemming from mounting doubts about the reliability of the United States as an ally and protector of last resort, was showcased when China opened its first overseas defence production facility in Saudi Arabia for the manufacturing of the CH-4 Caihong or Rainbow drone, as well as associated equipment.

The CH-4 is comparable to the US armed MQ-9 Reaper drone that Washington has refused to sell to the Kingdom.

Saudi Arabia’s willingness to undermine its hedging strategy by challenging Russia’s refusal to continue to align its production levels with that of the Organisation of Oil Exporting Countries (OPEC) follows the Kingdom’s bowing to US pressure to acquire Lockheed Martin’s Terminal High Altitude Area Defense (THAAD) system rather than Russia’s S-400 anti-aircraft and anti-missile weapon.

Putin made a last-ditch sales pitch last September after the Kingdom’s six battalions of US-made Patriot batteries failed to detect drone and missile attacks on two of the country’s key oil facilities that knocked out half of its production capacity.

The decision by Mohammed bin Salman, known by his initials MBS, to confront Russia stemmed from a stark choice confronting the Crown Prince: endanger relations with the only power to have put forward a regional security plan that would have allowed the Kingdom to hedge its bets while maintaining close ties to the United States, or drive oil prices down in a bid to force Russia to coordinate production levels that would ensure a higher price.

Ultimately, the Crown Prince’s choice was driven by economics rather than long-term security.

Low oil prices have already forced the Kingdom to borrow from international financial markets. $80 per barrel is the price it needs to balance its budget. It is also the price MBS needs for his ambitious plans to diversify and streamline the Saudi economy and turn it into a cutting edge 21st-century knowledge hub.

MBS may in some respects have shot himself in the foot even if his assumption proves correct that the Kingdom could win a price and production war and that Russian President Vladimir Putin would see a longer-term move from a unipolar to a multilateral security arrangement in the Gulf as too big a prize to lose.

Last year’s limited initial public offering (IPO) on the Saudi stock exchange by Aramco, the Kingdom’s national oil company, that constituted a crown jewel in MBS’ economic reform plans, failed to convincingly address fears that it was subject to the whims of the Kingdom’s ruling elite.

The oil war with Russia may have convinced investors’ worst fears with Aramco raising capacity and production to help MBS with his gamble.

“This has proved to investors that their worst fears about Aramco were a reality. The company’s plans and its output decisions are based on MBS’ erratic behaviour,” said a Saudi official familiar with Aramco’s offering.

MBS may not be the only one to suffer consequences of the oil war, but his&nbsp;may be a tougher struggle because it involves restoration of trust.

The setback for US Shale oil companies that need a relatively high oil price to break even, the reason Russia was willing to go to war with Saudi Arabia, is likely to be temporary as was evident in 2014 when Saudi Arabia gunned for market share rather than price to drive American producers out of business.

“A protracted crude oil price war on the supply side, combined with the simultaneous demand shock caused by Covid-19’s impact on economic activity, will hurt oil producers everywhere,” said Tilak K Doshi, an energy scholar at the National University of Singapore’s Middle East Institute.

If the Crown Prince’s decision was driven by domestic considerations, so was Putin’s.

Yet, despite believing that OPEC had outlived its utility, Putin was taken aback by the ferocity of Saudi Arabia’s response to the Russian cancellation of its earlier production level agreement with OPEC, prompting Moscow to call for a return to the agreed levels for the first quarter of this year.

“OPEC is finished, so is any attempt to ‘manage’ the oil market. US shale (as a fully privately owned industry) operates on aggressive free-market principals. The Russians understand that and so does Saudi. The energy game (including alternatives) is now a survival of the fittest,” tweeted Ali Shihabi, a banker-turned-pro-Saudi-political commentator.

In Russia, MBS is up against an opponent that could prove to have a long breath.

Saudi Arabia’s oil spat with Russia throws a spanner into the works of the Kingdom’s long-standing effort to hedge its bets, a strategy that has taken on added significance as the Gulf comes to grips with the likelihood that the region’s security architecture will fundamentally change.

Saudi Arabia’s oil spat with Russia throws a spanner into the works of the Kingdom’s long-standing effort to hedge its bets, a strategy that has taken on added significance as the Gulf comes to grips with the likelihood that the region’s security architecture will fundamentally change. Saudi Arabia, despite a primary focus on close ties to the United States, has increasingly sought to put its eggs in multiple baskets by initially forging closer military and economic relations with Britain, France, and Germany, and more recently with Russia and China. Saudi Arabia has increasingly sought to put its eggs in multiple baskets, forging closer military and economic relations with Russia and China. The Saudi strategy, stemming from mounting doubts about the reliability of the United States as an ally and protector of last resort, was showcased when China opened its first overseas defence production facility in Saudi Arabia for the manufacturing of the CH-4 Caihong or Rainbow drone, as well as associated equipment. The CH-4 is comparable to the US armed MQ-9 Reaper drone that Washington has refused to sell to the Kingdom. Saudi Arabia’s willingness to undermine its hedging strategy by challenging Russia’s refusal to continue to align its production levels with that of the Organisation of Oil Exporting Countries (OPEC) follows the Kingdom’s bowing to US pressure to acquire Lockheed Martin’s Terminal High Altitude Area Defense (THAAD) system rather than Russia’s S-400 anti-aircraft and anti-missile weapon. Putin made a last-ditch sales pitch last September after the Kingdom’s six battalions of US-made Patriot batteries failed to detect drone and missile attacks on two of the country’s key oil facilities that knocked out half of its production capacity. The decision by Mohammed bin Salman, known by his initials MBS, to confront Russia stemmed from a stark choice confronting the Crown Prince: endanger relations with the only power to have put forward a regional security plan that would have allowed the Kingdom to hedge its bets while maintaining close ties to the United States, or drive oil prices down in a bid to force Russia to coordinate production levels that would ensure a higher price. Ultimately, the Crown Prince’s choice was driven by economics rather than long-term security. Low oil prices have already forced the Kingdom to borrow from international financial markets. $80 per barrel is the price it needs to balance its budget. It is also the price MBS needs for his ambitious plans to diversify and streamline the Saudi economy and turn it into a cutting edge 21st-century knowledge hub. MBS may in some respects have shot himself in the foot even if his assumption proves correct that the Kingdom could win a price and production war and that Russian President Vladimir Putin would see a longer-term move from a unipolar to a multilateral security arrangement in the Gulf as too big a prize to lose. Last year’s limited initial public offering (IPO) on the Saudi stock exchange by Aramco, the Kingdom’s national oil company, that constituted a crown jewel in MBS’ economic reform plans, failed to convincingly address fears that it was subject to the whims of the Kingdom’s ruling elite. The oil war with Russia may have convinced investors’ worst fears with Aramco raising capacity and production to help MBS with his gamble. “This has proved to investors that their worst fears about Aramco were a reality. The company’s plans and its output decisions are based on MBS’ erratic behaviour,” said a Saudi official familiar with Aramco’s offering. MBS may not be the only one to suffer consequences of the oil war, but his may be a tougher struggle because it involves restoration of trust. The setback for US Shale oil companies that need a relatively high oil price to break even, the reason Russia was willing to go to war with Saudi Arabia, is likely to be temporary as was evident in 2014 when Saudi Arabia gunned for market share rather than price to drive American producers out of business. “A protracted crude oil price war on the supply side, combined with the simultaneous demand shock caused by Covid-19’s impact on economic activity, will hurt oil producers everywhere,” said Tilak K Doshi, an energy scholar at the National University of Singapore’s Middle East Institute. If the Crown Prince’s decision was driven by domestic considerations, so was Putin’s. Yet, despite believing that OPEC had outlived its utility, Putin was taken aback by the ferocity of Saudi Arabia’s response to the Russian cancellation of its earlier production level agreement with OPEC, prompting Moscow to call for a return to the agreed levels for the first quarter of this year. “OPEC is finished, so is any attempt to ‘manage’ the oil market. US shale (as a fully privately owned industry) operates on aggressive free-market principals. The Russians understand that and so does Saudi. The energy game (including alternatives) is now a survival of the fittest,” tweeted Ali Shihabi, a banker-turned-pro-Saudi-political commentator. In Russia, MBS is up against an opponent that could prove to have a long breath.

Playing for higher stakes: Saudi Arabia gambles on oil war with Russia

Oil&nbsp;prices&nbsp;surged&nbsp;more&nbsp;than&nbsp;six&nbsp;per cent&nbsp;in&nbsp;Asian&nbsp;trade&nbsp;Tuesday&nbsp;following&nbsp;heavy&nbsp;losses&nbsp;a&nbsp;day&nbsp;earlier&nbsp;after&nbsp;top&nbsp;exporter&nbsp;Saudi&nbsp;Arabia&nbsp;began&nbsp;a&nbsp;price&nbsp;war&nbsp;with&nbsp;Russia.

Also read:&nbsp;<a href="https://www.wionews.com/business-economy/oil-bounce-supports-asia-stocks-after-black-monday-285351" hreflang="en">Oil bounce supports Asia stocks after 'Black Monday'</a>

West Texas Intermediate was trading up 6.1 per cent&nbsp;at&nbsp;more&nbsp;than&nbsp;$33 a barrel while Brent crude advanced 6.6 per cent&nbsp;to over $36 a barrel.&nbsp;

Prices&nbsp;had plunged by almost a third Monday, the biggest drop since the 1991 Gulf&nbsp;War&nbsp;after&nbsp;Riyadh drove through massive&nbsp;price&nbsp;cuts in a bid to win market share.

<div class="videoWrapper trancodeVideo"><iframe allowfullscreen="" autoplay="1" class="includeVideo" frameborder="0" height="350" src="http://13.235.153.162/videos/wion-fineprint-saudi-arabia-plans-big-oil-output-hike-285319/embed" style="width:100%;max-width:560px;" width="560"></iframe></div>

That came&nbsp;after&nbsp;Russia&nbsp;rejected calls from&nbsp;oil-exporting group OPEC, which includes&nbsp;Saudi&nbsp;Arabia, for deeper output cuts to combat a coronavirus-fuelled slump in demand.&nbsp;

The bust-up signals the disintegration of an alliance between OPEC and&nbsp;Russia, the world's second-biggest&nbsp;oil&nbsp;producer, which sought to control supply to support&nbsp;prices.&nbsp;

"Investors are buckling in for a protracted and precarious battle of the&nbsp;oil&nbsp;mega powers for world dominance," said Stephen Innes, chief market strategist at AxiCorp.

He said it was unclear whether the&nbsp;Saudi&nbsp;move was "a short-term strategy or will be sustained for a prolonged period -- which makes the outlook for crude&nbsp;prices&nbsp;extraordinarily uncertain".

Oil prices surged more than six per cent in Asian trade Tuesday following heavy losses a day earlier after top exporter Saudi Arabia began a price war with Russia.

Oil prices surged more than six per cent in Asian trade Tuesday following heavy losses a day earlier after top exporter Saudi Arabia began a price war with Russia. Also read: Oil bounce supports Asia stocks after 'Black Monday' West Texas Intermediate was trading up 6.1 per cent at more than $33 a barrel while Brent crude advanced 6.6 per cent to over $36 a barrel. Prices had plunged by almost a third Monday, the biggest drop since the 1991 Gulf War after Riyadh drove through massive price cuts in a bid to win market share. That came after Russia rejected calls from oil-exporting group OPEC, which includes Saudi Arabia, for deeper output cuts to combat a coronavirus-fuelled slump in demand. The bust-up signals the disintegration of an alliance between OPEC and Russia, the world's second-biggest oil producer, which sought to control supply to support prices. "Investors are buckling in for a protracted and precarious battle of the oil mega powers for world dominance," said Stephen Innes, chief market strategist at AxiCorp. He said it was unclear whether the Saudi move was "a short-term strategy or will be sustained for a prolonged period -- which makes the outlook for crude prices extraordinarily uncertain".

Oil prices claw back ground post crash

Oil futures were set for a sixth day of losses as the death toll from a virus in China rose, but the heavy sell-off of recent sessions was curbed by output outages in Libya and OPEC comments designed to calm demand fears.

Oil futures were set for a sixth day of losses as the death toll from a virus in China rose, but the heavy sell-off of recent sessions was curbed by output outages in Libya and OPEC comments designed to calm demand fears. Brent crude was down 51 cents at $58.81 a barrel at 0925 GMT, having hit a three-month low of $58.50 on Monday as the virus outbreak triggered a global sell-off of riskier assets. US West Texas Intermediate was down 32 cents at $52.82 a barrel, after slipping to its lowest since early October in the previous session at $52.13. Both contracts are on track for their worst monthly falls since May. The United States and other countries warned against travel to China as the coronavirus death toll rose to more than 100 and after the virus was detected in more than a dozen countries outside China. Oil investors are concerned that travel advisories, other restrictions and any sizable impact on growth in China and elsewhere will dampen demand for crude and related products against a backdrop of plentiful supply. Also Read: Oil prices slip over China virus fears Japan, one of the world's top oil buyers, warned about the risks to its economy from the virus, and Asian stock markets continued to suffer. As the oil price fell below that seen during a December meeting of the Organization of the Petroleum Exporting Countries (OPEC) and its allies led by Russia, Saudi Arabia said on Monday the group could respond to any changes in demand. Saudi and other OPEC producers, however, sought to downplay demand concerns resulting from the virus outbreak. The group known as OPEC+ agreed in December to widen their supply cuts by 500,000 barrels per day (BPD) to 1.7 million BPD until the end of March. While markets wait for an update on China's oil demand, one eye is on Libya where output is down by nearly 75 per cent to just below 300,000 BPD amid the most extensive oil blockade for years. "Markets need to get a proper assessment of oil demand in China," said Olivier Jakob of consultancy Petromatrix. "And as long as Libya continues to be shut, OPEC probably does not need to do anything."

Oil rout extends to sixth day as China virus death toll rises

By Rockford Weitz

Soaring tensions between Iran and the United States have reignited fears that the Strait of Hormuz could become a flashpoint as Tehran responds to the killing of its top general.

Oil prices climbed on news of the fatal airstrike, reflecting concern that any fallout could disrupt shipping in the narrow seaway through which 21 per cent of the world’s crude oil passes.

Meanwhile, the US Maritime Administration issued an alert over potential Iranian action against “Maritime interests in the region” and the UK announced that the Royal Navy would resume escorting vessels through the Strait of Hormuz as a precaution.

As a researcher who studies strategic maritime chokepoints like this one in the Middle East, I have seen how past skirmishes in this waterway have fit into Iran’s use of hybrid warfare – unconventional tactics that achieve strategic goals without triggering conventional military retaliation. In fact, Iranian leaders will likely feel tremendous political pressure to ratchet up maritime hybrid warfare in response to the drone strike that killed the general.

A 21-mile-wide waterway

This 21-mile-wide channel connects the Indian Ocean with the Gulf. For all of recorded history, it has connected Arab and Persian civilisations with the Indian subcontinent and Pacific Asia. For example, before the rise of European seaborne empires in the 15th and 16th centuries, porcelain from China and spices from the Indochina peninsula often passed through the strait on the way to Central Asia and Europe.

Today the Strait of Hormuz separates Iran from the countries of Oman and the United Arab Emirates, which have strong military ties with the United States.

All shipping traffic from energy-rich Gulf countries converges in the strait, including crude oil and liquefied natural gas exports from Iran, Iraq, Kuwait, Bahrain, Qatar, Saudi Arabia and the United Arab Emirates.

This maritime chokepoint became an arena of conflict during the Iran-Iraq War in the 1980s. Each side in the so-called “Tanker War” tried to sink the other’s energy exports. To avoid being targeted, Kuwaiti oil tankers were reflagged under the US&nbsp;shipping registry, obscuring their true ownership. Although crude oil continued to flow, marine insurance rates for vessels operating in the strait spiked by as much as 400 per cent.

Why is the strait a concern now? 
 
The US killing of General Qasem Soleimani has sparked fears that Iran could take action in the Strait of Hormuz as part of a retaliatory move – as they have threatened before.

Recent tensions in the Strait of Hormuz arose after the Trump administration’s decision to leave the Iran nuclear deal in May 2018. When Iran struck that accord in 2015 with the US, UK, Russia, France, China, Germany and the European Union, it agreed to restrict its nuclear development in exchange for lifting economic sanctions against it.

By July 2018, Iran had threatened to close the Strait of Hormuz to retaliate against the ratcheting up of US&nbsp;sanctions against it.

By engaging in hybrid warfare, Iran appeared to be disrupting trade flows through the Strait, raising diplomatic stakes in the process.

Notably, in June 2019 attacks on Japanese and Norwegian-owned oil tankers coincided with Japanese Prime Minister Shinzo Abe’s visit to Tehran. Iran denied any involvement, but the US&nbsp;released video footage it said showed Iranian special forces removing an unexploded mine from one of the tanker’s hulls. If Iran was behind the attacks, it could have been a signal to Japan and China that they need to pressure the Trump administration to ease its sanctions against Iran – or risk disruptions to vital oil and gas exports to Asia transiting the Strait of Hormuz.

Could Iran close the strait?

In my view, Iran would certainly have trouble stopping all shipping through the Strait of Hormuz. Modern cargo vessels are massive and difficult to disable. Unlike in the 1980s, most oil tankers now have double hulls, making them harder to sink. Furthermore, earlier this year the US assembled a multinational coalition to monitor and respond to threats to commercial shipping in the strait.

Iran will also be wary of the impact that closing the Strait of Hormuz could have on its relations with important economic partners, such as China. It is estimated that 76 per cent of crude oil passing through the waterway is destined for Asian markets, with China, India, Japan, South Korea and Singapore among the largest markets.

In the past both the US and Iran have pivoted back to diplomatic solutions when tensions have become too high, suggesting that neither side wants to see the conflict escalate from hybrid warfare into a full-blown war.

 
(Rockford Weitz is Professor of Practice &amp; Director, Fletcher Maritime Studies Program, The Fletcher School, Tufts University) 
 
(This article was originally published on The Conversation. Read the <a href="https://theconversation.com/could-iran-us-tensions-mean-troubled-waters-ahead-in-the-strait-of-hormuz-129508">original article</a>)

(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)&nbsp;

 
&nbsp;

By Rockford Weitz Soaring tensions between Iran and the United States have reignited fears that the Strait of Hormuz could become a flashpoint as Tehran responds to the killing of its top general.

By Rockford Weitz Soaring tensions between Iran and the United States have reignited fears that the Strait of Hormuz could become a flashpoint as Tehran responds to the killing of its top general. Oil prices climbed on news of the fatal airstrike, reflecting concern that any fallout could disrupt shipping in the narrow seaway through which 21 per cent of the world’s crude oil passes. Meanwhile, the US Maritime Administration issued an alert over potential Iranian action against “Maritime interests in the region” and the UK announced that the Royal Navy would resume escorting vessels through the Strait of Hormuz as a precaution. As a researcher who studies strategic maritime chokepoints like this one in the Middle East, I have seen how past skirmishes in this waterway have fit into Iran’s use of hybrid warfare – unconventional tactics that achieve strategic goals without triggering conventional military retaliation. In fact, Iranian leaders will likely feel tremendous political pressure to ratchet up maritime hybrid warfare in response to the drone strike that killed the general. A 21-mile-wide waterway This 21-mile-wide channel connects the Indian Ocean with the Gulf. For all of recorded history, it has connected Arab and Persian civilisations with the Indian subcontinent and Pacific Asia. For example, before the rise of European seaborne empires in the 15th and 16th centuries, porcelain from China and spices from the Indochina peninsula often passed through the strait on the way to Central Asia and Europe. Today the Strait of Hormuz separates Iran from the countries of Oman and the United Arab Emirates, which have strong military ties with the United States. All shipping traffic from energy-rich Gulf countries converges in the strait, including crude oil and liquefied natural gas exports from Iran, Iraq, Kuwait, Bahrain, Qatar, Saudi Arabia and the United Arab Emirates. This maritime chokepoint became an arena of conflict during the Iran-Iraq War in the 1980s. Each side in the so-called “Tanker War” tried to sink the other’s energy exports. To avoid being targeted, Kuwaiti oil tankers were reflagged under the US shipping registry, obscuring their true ownership. Although crude oil continued to flow, marine insurance rates for vessels operating in the strait spiked by as much as 400 per cent. Why is the strait a concern now? The US killing of General Qasem Soleimani has sparked fears that Iran could take action in the Strait of Hormuz as part of a retaliatory move – as they have threatened before. Recent tensions in the Strait of Hormuz arose after the Trump administration’s decision to leave the Iran nuclear deal in May 2018. When Iran struck that accord in 2015 with the US, UK, Russia, France, China, Germany and the European Union, it agreed to restrict its nuclear development in exchange for lifting economic sanctions against it. By July 2018, Iran had threatened to close the Strait of Hormuz to retaliate against the ratcheting up of US sanctions against it. By engaging in hybrid warfare, Iran appeared to be disrupting trade flows through the Strait, raising diplomatic stakes in the process. Notably, in June 2019 attacks on Japanese and Norwegian-owned oil tankers coincided with Japanese Prime Minister Shinzo Abe’s visit to Tehran. Iran denied any involvement, but the US released video footage it said showed Iranian special forces removing an unexploded mine from one of the tanker’s hulls. If Iran was behind the attacks, it could have been a signal to Japan and China that they need to pressure the Trump administration to ease its sanctions against Iran – or risk disruptions to vital oil and gas exports to Asia transiting the Strait of Hormuz. Could Iran close the strait? In my view, Iran would certainly have trouble stopping all shipping through the Strait of Hormuz. Modern cargo vessels are massive and difficult to disable. Unlike in the 1980s, most oil tankers now have double hulls, making them harder to sink. Furthermore, earlier this year the US assembled a multinational coalition to monitor and respond to threats to commercial shipping in the strait. Iran will also be wary of the impact that closing the Strait of Hormuz could have on its relations with important economic partners, such as China. It is estimated that 76 per cent of crude oil passing through the waterway is destined for Asian markets, with China, India, Japan, South Korea and Singapore among the largest markets. In the past both the US and Iran have pivoted back to diplomatic solutions when tensions have become too high, suggesting that neither side wants to see the conflict escalate from hybrid warfare into a full-blown war. (Rockford Weitz is Professor of Practice & Director, Fletcher Maritime Studies Program, The Fletcher School, Tufts University) (This article was originally published on The Conversation. Read the original article) (Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)

Could Iran-US tensions mean troubled waters ahead in the Strait of Hormuz?

<a href="https://www.wionews.com/business-economy/oil-prices-steady-on-track-for-biggest-yearly-rise-since-2016-271227">Oil prices</a> soared more than four per cent Friday and equities reversed early gains following news that the US had killed a top Iranian general, fanning fresh fears of a conflict in the crude-rich region.

The head of Iran's Quds Force, <a href="https://www.wionews.com/world/deputy-head-of-group-irans-quds-force-head-qasem-soleimani-killed-hashed-al-shaabi-271762">Qasem Soleimani</a>, was hit in an attack on Baghdad's international airport early Friday, according to Hashed, a powerful Iraqi paramilitary force linked to Tehran.

The Indian Rupee weakened and shares slipped as oil prices surged after US airstrikes killed a top Iranian commander, intensifying geopolitical tensions in the Middle East.

Other Asian markets also tumbled following news of the airstrikes, in which the head of Iran's elite Quds Force and a top Iraqi militia leader were killed early on Friday at Baghdad airport.

The Rupee weakened by 0.26 per cent to 71.5525 against the dollar. India, the world's third-biggest oil consumer, imports about 80 per cent of its oil needs, making it highly susceptible to crude price swings.

Brent surged 4.4 per cent to $69.16 and WTI jumped 4.3 per cent to $63.84 as investors grow increasingly worried about a possible flare-up in the tinderbox Middle East.

"This is more than just bloodying Iran's nose," said AxiTrader's Stephen Innes. "This is an aggressive show of force and an outright provocation that could trigger another Middle East war."

The <a href="https://www.wionews.com/world/rocket-attack-on-baghdad-airport-top-iran-commander-killed-271756">killing of Soleimani</a> is a dramatic escalation of tensions between the US and Iran and comes after a pro-Iran mob this week laid siege to the US embassy in Iraq following deadly American airstrikes on the hardline Hashed faction.

The attack on the embassy highlighted new strains in the US-Iraqi relationship, which officials from both countries have described to sources as the "coldest" in years.

It also comes as tensions between the US and North Korea worsen, with <a href="https://www.wionews.com/world/north-korean-leader-skips-set-piece-new-years-speech-271374">Kim Jong Un</a> declaring a self-imposed moratorium on nuclear and intercontinental ballistic missile tests had ended, with talks with the US going nowhere.

"We are waking up to a less safe world than it was only hours ago, especially if we combine this with simmering tension in the Korean peninsula," Innes added.

The drama sent investors rushing for the hills and safe-haven units rallied with the yen up 0.7 per cent against the dollar and gold climbing more than one per cent.

High-risk currencies retreated against the greenback, with South Korea's won down 0.6 per cent, Australia's dollar down 0.4 per cent and the South African rand down more than one per cent.

Equities sank into the red, having been enjoying the second day of the year rallying on trade optimism.

Hong Kong fell 0.2 per cent, while <a href="https://www.wionews.com/world/china-halts-british-stock-link-over-political-tensions-sources-271591">Shanghai</a> shed 0.1 per cent. Singapore retreated 0.2 per cent, Seoul lost 0.1 per cent and Taipei eased 0.3 per cent. However, Sydney, Wellington, and Manila held in positive territory.

Markets had all been well up before news of the strike, thanks to ongoing optimism fuelled by the China-US trade agreement, looser central bank monetary policies and easing Brexit worries.

Oil prices soared more than four per cent Friday and equities reversed early gains following news that the US had killed a top Iranian general, fanning fresh fears of a conflict in the crude-rich region.

Oil prices soared more than four per cent Friday and equities reversed early gains following news that the US had killed a top Iranian general, fanning fresh fears of a conflict in the crude-rich region. The head of Iran's Quds Force, Qasem Soleimani, was hit in an attack on Baghdad's international airport early Friday, according to Hashed, a powerful Iraqi paramilitary force linked to Tehran. The Indian Rupee weakened and shares slipped as oil prices surged after US airstrikes killed a top Iranian commander, intensifying geopolitical tensions in the Middle East. Other Asian markets also tumbled following news of the airstrikes, in which the head of Iran's elite Quds Force and a top Iraqi militia leader were killed early on Friday at Baghdad airport. The Rupee weakened by 0.26 per cent to 71.5525 against the dollar. India, the world's third-biggest oil consumer, imports about 80 per cent of its oil needs, making it highly susceptible to crude price swings. Brent surged 4.4 per cent to $69.16 and WTI jumped 4.3 per cent to $63.84 as investors grow increasingly worried about a possible flare-up in the tinderbox Middle East. "This is more than just bloodying Iran's nose," said AxiTrader's Stephen Innes. "This is an aggressive show of force and an outright provocation that could trigger another Middle East war." The killing of Soleimani is a dramatic escalation of tensions between the US and Iran and comes after a pro-Iran mob this week laid siege to the US embassy in Iraq following deadly American airstrikes on the hardline Hashed faction. The attack on the embassy highlighted new strains in the US-Iraqi relationship, which officials from both countries have described to sources as the "coldest" in years. It also comes as tensions between the US and North Korea worsen, with Kim Jong Un declaring a self-imposed moratorium on nuclear and intercontinental ballistic missile tests had ended, with talks with the US going nowhere. "We are waking up to a less safe world than it was only hours ago, especially if we combine this with simmering tension in the Korean peninsula," Innes added. The drama sent investors rushing for the hills and safe-haven units rallied with the yen up 0.7 per cent against the dollar and gold climbing more than one per cent. High-risk currencies retreated against the greenback, with South Korea's won down 0.6 per cent, Australia's dollar down 0.4 per cent and the South African rand down more than one per cent. Equities sank into the red, having been enjoying the second day of the year rallying on trade optimism. Hong Kong fell 0.2 per cent, while Shanghai shed 0.1 per cent. Singapore retreated 0.2 per cent, Seoul lost 0.1 per cent and Taipei eased 0.3 per cent. However, Sydney, Wellington, and Manila held in positive territory. Markets had all been well up before news of the strike, thanks to ongoing optimism fuelled by the China-US trade agreement, looser central bank monetary policies and easing Brexit worries.

Oil prices surge after US strike kills Iranian general Soleimani

Every day we hear that 'data' is the new oil or 'lithium battery' is the new oil. What about 'the oil'? Is oil still the most valued asset? Is the oil industry facing a threat of extinction?&nbsp;

On WION Edit, we will try to analyse the might of the oil industry and its place in the global economy.

Recently, Forbes compiled a list of the 15 most profitable industries. Data, batteries or arms were not in the top three, but oil and gas extraction was.

You know what topped the list - accounting and legal services - they're more profitable than oil.

Whether we like it or not, the global economy is set up in a way in which oil is the prime mover, the commodity of choice and top value.&nbsp;

The tech industry dominates the wall street, but the asset prices are highly inflated and the market valuations are not the reflection of the health of the tech industry.

Oil drives the global economy. Foreign policies of countries including ours are devised to derive benefits in oil trade.

The signs of a post-oil future are visible, but that future is far away. Elon Musk, electric vehicles, battery-fuelled devices, extreme weather events, climate protests and even climate emergency - these have become phrases.

But the truth is that last year was the most profitable year for oil producers in the US in a long time.

In a world where the demand for crude oil is gradually decreasing, oil remains a very profitable commodity.

Clearly the oil and gas industry is not going away. Though the industry faces problems like volatile prices, fall in production, but these are only reflective of the broad slowdown in the global economy, not the future of the oil industry.

A recent report by Mckinsey shows that renewables account for only 19 per cent of the overall energy mix. That figure is predicted to go up to 34 per cent by 2050.

This alone shows that the oil and gas industry will be on a strong footing for the next 30 years easily. There may be a lull now, but demand will go up in future.

And renewables cannot satisfy the bulk of the energy demand. This is indeed a tricky consolidation phase for the industry, but to write obituaries for the oil industry is preposterous, academic and one-sided. The demand for energy will be the deciding factor.

(Disclaimer: WION Edit is the channel's take on the big events of the world)&nbsp; 
&nbsp;

Every day we hear that 'data' is the new oil or 'lithium battery' is the new oil. What about 'the oil'? Is oil still the most valued asset? Is the oil industry facing a threat of extinction?

Every day we hear that 'data' is the new oil or 'lithium battery' is the new oil. What about 'the oil'? Is oil still the most valued asset? Is the oil industry facing a threat of extinction? On WION Edit, we will try to analyse the might of the oil industry and its place in the global economy. Recently, Forbes compiled a list of the 15 most profitable industries. Data, batteries or arms were not in the top three, but oil and gas extraction was. You know what topped the list - accounting and legal services - they're more profitable than oil. Whether we like it or not, the global economy is set up in a way in which oil is the prime mover, the commodity of choice and top value. The tech industry dominates the wall street, but the asset prices are highly inflated and the market valuations are not the reflection of the health of the tech industry. Oil drives the global economy. Foreign policies of countries including ours are devised to derive benefits in oil trade. The signs of a post-oil future are visible, but that future is far away. Elon Musk, electric vehicles, battery-fuelled devices, extreme weather events, climate protests and even climate emergency - these have become phrases. But the truth is that last year was the most profitable year for oil producers in the US in a long time. In a world where the demand for crude oil is gradually decreasing, oil remains a very profitable commodity. Clearly the oil and gas industry is not going away. Though the industry faces problems like volatile prices, fall in production, but these are only reflective of the broad slowdown in the global economy, not the future of the oil industry. A recent report by Mckinsey shows that renewables account for only 19 per cent of the overall energy mix. That figure is predicted to go up to 34 per cent by 2050. This alone shows that the oil and gas industry will be on a strong footing for the next 30 years easily. There may be a lull now, but demand will go up in future. And renewables cannot satisfy the bulk of the energy demand. This is indeed a tricky consolidation phase for the industry, but to write obituaries for the oil industry is preposterous, academic and one-sided. The demand for energy will be the deciding factor. (Disclaimer: WION Edit is the channel's take on the big events of the world)

WION Edit: Oil drives the global economy

China announced on Monday the establishment of a national oil and gas pipeline company in a move intended to boost competition, the Xinhua state news agency said.

The long-awaited state pipeline company aims to provide other investors fair market access to infrastructure that is mainly controlled by China's three national oil companies, Xinhua said.

"The new company will separate (oil and gas) transportation, production and sales, and open (transportation) to third-party entities, which will benefit market competition," said Xinhua, citing an unidentified official at the newly launched pipeline company.

The new entity is expected to manage most of the country's pipeline infrastructure, controlled by energy giants China National Petroleum Corp (<a href="https://www.wionews.com/business-%26-economy/chinas-cnpc-to-invest-more-than-22-billion-to-boost-xinjiang-oil-gas-output-by-2020-154342">CNPC</a>), Sinopec and <a href="https://www.wionews.com/business-economy/failed-exxon-talks-left-petrobras-stranded-for-auctions-report-261167">CNOOC</a>, and some underground natural gas storage, as well as a few liquefied natural gas terminals.

As of end-2018, CNPC owned 63 per cent&nbsp;of China's mainstream oil and gas pipelines, while Sinopec and CNOOC controlled 31&nbsp;per cent&nbsp;and 6 per cent, respectively.

In a separate report on Monday, Xinhua said the new entity is expected to be overseen by the State-owned Assets Supervision and Administration Commission (SASAC), which will have a 40&nbsp;per cent&nbsp;share in the new entity.

Citing an unidentified industry insider, Xinhua reported the three energy giants will share the remaining ownership, with CNPC holding 30 per cent, Sinopec 20 per cent&nbsp;and CNOOC 10 per cent.

China announced on Monday the establishment of a national oil and gas pipeline company in a move intended to boost competition, the Xinhua state news agency said.

China announced on Monday the establishment of a national oil and gas pipeline company in a move intended to boost competition, the Xinhua state news agency said. The long-awaited state pipeline company aims to provide other investors fair market access to infrastructure that is mainly controlled by China's three national oil companies, Xinhua said. "The new company will separate (oil and gas) transportation, production and sales, and open (transportation) to third-party entities, which will benefit market competition," said Xinhua, citing an unidentified official at the newly launched pipeline company. The new entity is expected to manage most of the country's pipeline infrastructure, controlled by energy giants China National Petroleum Corp (CNPC), Sinopec and CNOOC, and some underground natural gas storage, as well as a few liquefied natural gas terminals. As of end-2018, CNPC owned 63 per cent of China's mainstream oil and gas pipelines, while Sinopec and CNOOC controlled 31 per cent and 6 per cent, respectively. In a separate report on Monday, Xinhua said the new entity is expected to be overseen by the State-owned Assets Supervision and Administration Commission (SASAC), which will have a 40 per cent share in the new entity. Citing an unidentified industry insider, Xinhua reported the three energy giants will share the remaining ownership, with CNPC holding 30 per cent, Sinopec 20 per cent and CNOOC 10 per cent.

China sets up national oil, gas pipe firm in drive to 'boost competition': Report

We have seen the scale of the protest in Iran. We have brought you the responses. And we have also looked at the causes - both internal and external.

We have summarised the reasons why America targets Iran. On WION Edit, we look at what happens next.&nbsp;

What would an unstable Iran mean for the world?

Peace is already eroding. The erosion began when the US walked out of the nuclear deal despite Iran's compliance.

Then it imposed crippling sanctions. Saudi oil tankers were attacked, oil supplies were disrupted.

Then there's Lebanon - the home of Hezbollah - it's at boiling point. The number of Hezbollah fighters has doubled in the last decade.

If Iran's regime disintegrates, it will use the Hezbollah to bring down the whole region.

Pushed to the wall, an aggressive Iran will also target Israel. It openly backs Palestinian factions in the west bank.&nbsp;

It openly threatens the annihilation of Israel. On the other side, the situation is fragile in the strait of Hormuz. Since the month of May, six oil tankers and a spy drone of the US have been attacked.

Such attacks may escalate if Iran is pushed to the brink. In other words, political instability inside Iran affects peace outside. It has political clout and it has a lot of oil.

Iran holds 10 per cent of the world's proven oil reserves, 15 per cent of gas. Until a few months back, it was the world's second-largest oil exporter.

Today Iran is isolated and sanctioned, it cannot sell oil even to traditional importers like China and India. They have stopped buying under the US pressure.

But Iran's economic survival solely depends on oil exports. Iran is hoping that a cut in global oil production will force other countries to return to it.

Which is what explains the attacks on Saudi oil tankers, disrupt supply and attract buyers.

The rivalries are historic:&nbsp; 
Iran vs Israel 
Iran vs Saudi Arabia 
Iran vs US

It is important to not let them spill over, that would be bad news - both for regional peace and the global economy.

Iran failed to utilise the advantages of the nuclear agreement. It failed to diversify its economy.

It failed to meet the growth expectations of its people, and thus, is facing their anger.

Any external bids to stir this pot will only mean trouble for all. But an unstable Iran can be volatile and nothing good can come out of that. 
 
(Disclaimer: WION Edit is the channel's take on the big events of the world)

We have seen the scale of the protest in Iran. We have brought you the responses. And we have also looked at the causes - both internal and external. We have summarised the reasons why America targets Iran.

We have seen the scale of the protest in Iran. We have brought you the responses. And we have also looked at the causes - both internal and external. We have summarised the reasons why America targets Iran. On WION Edit, we look at what happens next. What would an unstable Iran mean for the world? Peace is already eroding. The erosion began when the US walked out of the nuclear deal despite Iran's compliance. Then it imposed crippling sanctions. Saudi oil tankers were attacked, oil supplies were disrupted. Then there's Lebanon - the home of Hezbollah - it's at boiling point. The number of Hezbollah fighters has doubled in the last decade. If Iran's regime disintegrates, it will use the Hezbollah to bring down the whole region. Pushed to the wall, an aggressive Iran will also target Israel. It openly backs Palestinian factions in the west bank. It openly threatens the annihilation of Israel. On the other side, the situation is fragile in the strait of Hormuz. Since the month of May, six oil tankers and a spy drone of the US have been attacked. Such attacks may escalate if Iran is pushed to the brink. In other words, political instability inside Iran affects peace outside. It has political clout and it has a lot of oil. Iran holds 10 per cent of the world's proven oil reserves, 15 per cent of gas. Until a few months back, it was the world's second-largest oil exporter. Today Iran is isolated and sanctioned, it cannot sell oil even to traditional importers like China and India. They have stopped buying under the US pressure. But Iran's economic survival solely depends on oil exports. Iran is hoping that a cut in global oil production will force other countries to return to it. Which is what explains the attacks on Saudi oil tankers, disrupt supply and attract buyers. The rivalries are historic: Iran vs Israel Iran vs Saudi Arabia Iran vs US It is important to not let them spill over, that would be bad news - both for regional peace and the global economy. Iran failed to utilise the advantages of the nuclear agreement. It failed to diversify its economy. It failed to meet the growth expectations of its people, and thus, is facing their anger. Any external bids to stir this pot will only mean trouble for all. But an unstable Iran can be volatile and nothing good can come out of that. (Disclaimer: WION Edit is the channel's take on the big events of the world)

WION Edit: What would an unstable Iran mean for the world?

&nbsp;Oil&nbsp;rose on Thursday after industry data showed a surprise drop in&nbsp;US&nbsp;crude&nbsp;inventories, while&nbsp;comments&nbsp;from an&nbsp;<a href="https://www.wionews.com/.../new-oil-field-adds-222-billion-barrels-with- current-technology-iran-261333">OPEC</a>&nbsp;official about lower-than-expected&nbsp;US&nbsp;shale&nbsp;production&nbsp;growth&nbsp;in 2020 also provided some support.

Prices, however, were capped by mixed signs for&nbsp;oil&nbsp;demand in China, the world's biggest&nbsp;crude&nbsp;importer, as industrial output rose more slowly than expected in October, but&nbsp;oil&nbsp;refinery throughput hit the second-highest level ever.

Brent futures rose 47 cents, or 0.8 per cent, to $62.84 per barrel by 0808 GMT, while&nbsp;US&nbsp;West Texas Intermediate&nbsp;crude&nbsp;gained 47 cents, or 0.8 per cent, to reach $57.59.

The Secretary General of the Organization of the Petroleum Exporting Countries (OPEC) Mohammad Barkindo said on Wednesday that there would likely be downward revisions of supply going into 2020, especially from United States&nbsp;shale, adding that some&nbsp;US&nbsp;shale&nbsp;oil&nbsp;firms see output growing by only 300,000-400,000 barrels per day (bpd).

While Barkindo's&nbsp;comments&nbsp;supported&nbsp;oil&nbsp;prices, there is not a clear way for&nbsp;OPEC&nbsp;to forecast&nbsp;oil&nbsp;production outside the group, Howie Lee, an economist at Singapore's OCBC bank said.

"I don't see much changes in supply so prices are still trading within the same range from the start of November," he said.

Barkindo's&nbsp;comments&nbsp;were also in contrast with forecasts by the&nbsp;<a href="https://www.wionews.com/.../oil-prices-gain-after-us-inventories-fall-249041">US&nbsp;Energy Information Administration</a> (EIA) on Wednesday that&nbsp;US&nbsp;oil&nbsp;production is on course to hit new records this year and next.

The American Petroleum Institute reported on Wednesday an unexpected drop in&nbsp;crude&nbsp;stockpiles by 541,000 barrels in the week to November&nbsp;8, against analysts' expectations of an increase of 1.6 million barrels. Gasoline and distillates inventories increased, the API data showed.

Official weekly EIA data is due at 11:00 a.m. EST (1600 GMT) on Thursday. Both reports were delayed a day for the&nbsp;US&nbsp;Veterans Day holiday on Monday.

OPEC&nbsp;and its allies, including Russia, meet on Dec. 5-6 to discuss&nbsp;output policy and production curbs of 1.2 million bpd that have been in place since January with the aim of supporting&nbsp;crude&nbsp;prices. The pact runs&nbsp;to March 2020.

Barkindo said on Wednesday it was too early to say if further output cuts&nbsp;would be needed.

"They have made it quite clear that they are not reducing production further," said OCBC's Lee. "What Saudi can do now is to urge compliance among members especially Iraq and Nigeria. If they can comply, then they can talk about cuts."

Oil rose on Thursday after industry data showed a surprise drop in US crude inventories, while comments from an OPEC official about lower-than-expected US shale production growth in 2020 also provided some support.

Oil rose on Thursday after industry data showed a surprise drop in US crude inventories, while comments from an OPEC official about lower-than-expected US shale production growth in 2020 also provided some support. Prices, however, were capped by mixed signs for oil demand in China, the world's biggest crude importer, as industrial output rose more slowly than expected in October, but oil refinery throughput hit the second-highest level ever. Brent futures rose 47 cents, or 0.8 per cent, to $62.84 per barrel by 0808 GMT, while US West Texas Intermediate crude gained 47 cents, or 0.8 per cent, to reach $57.59. The Secretary General of the Organization of the Petroleum Exporting Countries (OPEC) Mohammad Barkindo said on Wednesday that there would likely be downward revisions of supply going into 2020, especially from United States shale, adding that some US shale oil firms see output growing by only 300,000-400,000 barrels per day (bpd). While Barkindo's comments supported oil prices, there is not a clear way for OPEC to forecast oil production outside the group, Howie Lee, an economist at Singapore's OCBC bank said. "I don't see much changes in supply so prices are still trading within the same range from the start of November," he said. Barkindo's comments were also in contrast with forecasts by the US Energy Information Administration (EIA) on Wednesday that US oil production is on course to hit new records this year and next. The American Petroleum Institute reported on Wednesday an unexpected drop in crude stockpiles by 541,000 barrels in the week to November 8, against analysts' expectations of an increase of 1.6 million barrels. Gasoline and distillates inventories increased, the API data showed. Official weekly EIA data is due at 11:00 a.m. EST (1600 GMT) on Thursday. Both reports were delayed a day for the US Veterans Day holiday on Monday. OPEC and its allies, including Russia, meet on Dec. 5-6 to discuss output policy and production curbs of 1.2 million bpd that have been in place since January with the aim of supporting crude prices. The pact runs to March 2020. Barkindo said on Wednesday it was too early to say if further output cuts would be needed. "They have made it quite clear that they are not reducing production further," said OCBC's Lee. "What Saudi can do now is to urge compliance among members especially Iraq and Nigeria. If they can comply, then they can talk about cuts."

Oil gains on US crude stocks fall, OPEC comments on slower US shale growth

By Sukru Cildir

The relationship between Saudi Arabia and Iran, both oil-rich states in the Middle East, has oscillated from co-operation to conflict throughout history. Alongside a range of factors that shape their rivalry including sectarianism and nationalism has been the politics of oil.

Oil is a strategic international commodity, and its use as a political tool is widespread. Its role in the Saudi-Iranian rivalry can’t be understood without unpicking the international context, and the power structures that govern the way countries interact with each other. At the heart of this is the dominance of the US over this international system.

The dynamics between the US, Iran and Saudi Arabia over oil were laid bare in September 2019, after a series of drone attacks on Saudi oil facilities. The attacks caused the suspension of 5.7m barrels per day (mbpd) of crude oil production, nearly half the Saudi output.

The Houthis, a Yemeni faction, claimed responsibility. However, American and Saudi government officials accused Iran of committing these attacks. In return, the Iranians blamed foreign forces in the region for the insecurity and told the US to leave the area.

While the Saudi-Iranian oil rivalry is ostensibly the business of these two countries, it has always had an international dimension, overshadowed by the US.

After the revolution

The 1979 Iranian revolution marked a turning point for the place oil played within the Saudi-Iranian relationship. Before then, both countries were important allies of the US, a position which brought with it political and economic benefits particularly to their oil industries. But the 1979 Islamic revolution in Iran paved the way for a separation of paths.

While Saudi Arabia remained a staunch ally of the US, Iran adopted a revolutionary and anti-Western foreign policy, which prompted its isolation from an international system that was dominated by the US.

As a result, ever since 1979, the Iranian oil industry has been subject to American pressure, through a range of economic sanctions and embargoes, which has crippled Iranian oil production. Iran has been unable to reach the level of oil production of over six mbpd that it had in the pre-revolution years. Meanwhile, Saudi oil production reached over 12 mbpd in 2018.

This led to the Iranian oil industry being deprived of necessary foreign investment and technology transfer, and it has fallen behind Saudi Aramco, the kingdom’s state-owned oil company, and other regional competitors. Saudi Arabia has largely backed the US policy of isolating and sanctioning Iran, particularly the Iranian oil industry, which has, as I’ve argued elsewhere, contributed to the ongoing tensions in the Saudi-Iranian relationship.

As Saudi Aramaco prepares for an IPO in December that could make it the world’s biggest publicly listed company, Iran is desperate to revitalise its own outmoded oil industry. As Iranian oil minister Bijan Zanganeh admitted in early 2019, many of Iran’s ageing oil facilities are in fact “operating museums”.

The US continues to have such an influence on Middle Eastern oil politics because of the way it has successfully pushed its own international agenda since 1945. After World War II, the US cemented its dominance over an international system built on the basis of liberal and capitalist principles. While the US rewards its allies with economic and political benefits, it punishes its challengers through a range of political and economic measures, not least economic sanctions.

Oil became a strategic international commodity in the post-World War II period, and began to play a pivotal role in the way the US maintained its global dominance. To do this, the US aimed to open up and transnationalise oil-rich economies in the Global South such as Saudi Arabia and Iran, to both promote its national interests and solidify its privileged position within the current system.

Accordingly, the supply of Middle Eastern oil into international markets without disruption – and at a reasonable price – became an essential instrument for maintaining American dominance, even though the US didn’t need to import oil from the Middle East.

A world of US dominance

The political economist Susan Strange provided a theoretical framework back in 1987 to explain the structure of US dominance over the international system through four main dimensions: production, finance, security and knowledge. This is also a useful way to understand how the US shapes the international oil market – and the Saudi-Iranian rivalry.

By 2018, in the wake of a shale boom, the US became the largest oil-producing country in the world by reaching production of 15 mbpd. Financially, oil has been priced and traded in US dollars, in particular since the early 1970s when a series of negotiations and agreements linking the sale of oil to the US dollar were made between Saudi Arabia and the US. This has increased global demand for US dollars, and helped the US deal with its trade deficit and keep its interest rates low. It has also helped the US to monitor the petroleum trade by controlling global bank transfers.

The US also stands as a main security provider to oil-rich Gulf monarchies, with publicly acknowledged military bases in over 12 countries in the Middle East. Additionally, it has a supremacy over global knowledge, most obviously through its continued domination and control of the sector’s technological needs. By leading global innovation and technological development in the shale revolution, for example, and having the highest budget for research and development, the US largely controls global technology transfer. This has also deprived Iran of necessary technology, capital and know-how to modernise its ageing oil industry, constraining production.

Therefore, despite the fact that the Saudi-Iranian oil rivalry seems like a regional issue, the role of American power in a globalised world has been key to shaping this regional political competition over oil.

(Sukru Cildir is PhD Candidate, Lancaster University)

(This article was originally published on The Conversation. Read the <a href="http://theconversation.com/how-saudi-iranian-oil-rivalry-has-been-shaped-by-american-power-124123">original article)</a>

(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL) &nbsp;

By Sukru Cildir The relationship between Saudi Arabia and Iran, both oil-rich states in the Middle East, has oscillated from co-operation to conflict throughout history.

By Sukru Cildir The relationship between Saudi Arabia and Iran, both oil-rich states in the Middle East, has oscillated from co-operation to conflict throughout history. Alongside a range of factors that shape their rivalry including sectarianism and nationalism has been the politics of oil. Oil is a strategic international commodity, and its use as a political tool is widespread. Its role in the Saudi-Iranian rivalry can’t be understood without unpicking the international context, and the power structures that govern the way countries interact with each other. At the heart of this is the dominance of the US over this international system. The dynamics between the US, Iran and Saudi Arabia over oil were laid bare in September 2019, after a series of drone attacks on Saudi oil facilities. The attacks caused the suspension of 5.7m barrels per day (mbpd) of crude oil production, nearly half the Saudi output. The Houthis, a Yemeni faction, claimed responsibility. However, American and Saudi government officials accused Iran of committing these attacks. In return, the Iranians blamed foreign forces in the region for the insecurity and told the US to leave the area. While the Saudi-Iranian oil rivalry is ostensibly the business of these two countries, it has always had an international dimension, overshadowed by the US. After the revolution The 1979 Iranian revolution marked a turning point for the place oil played within the Saudi-Iranian relationship. Before then, both countries were important allies of the US, a position which brought with it political and economic benefits particularly to their oil industries. But the 1979 Islamic revolution in Iran paved the way for a separation of paths. While Saudi Arabia remained a staunch ally of the US, Iran adopted a revolutionary and anti-Western foreign policy, which prompted its isolation from an international system that was dominated by the US. As a result, ever since 1979, the Iranian oil industry has been subject to American pressure, through a range of economic sanctions and embargoes, which has crippled Iranian oil production. Iran has been unable to reach the level of oil production of over six mbpd that it had in the pre-revolution years. Meanwhile, Saudi oil production reached over 12 mbpd in 2018. This led to the Iranian oil industry being deprived of necessary foreign investment and technology transfer, and it has fallen behind Saudi Aramco, the kingdom’s state-owned oil company, and other regional competitors. Saudi Arabia has largely backed the US policy of isolating and sanctioning Iran, particularly the Iranian oil industry, which has, as I’ve argued elsewhere, contributed to the ongoing tensions in the Saudi-Iranian relationship. As Saudi Aramaco prepares for an IPO in December that could make it the world’s biggest publicly listed company, Iran is desperate to revitalise its own outmoded oil industry. As Iranian oil minister Bijan Zanganeh admitted in early 2019, many of Iran’s ageing oil facilities are in fact “operating museums”. The US continues to have such an influence on Middle Eastern oil politics because of the way it has successfully pushed its own international agenda since 1945. After World War II, the US cemented its dominance over an international system built on the basis of liberal and capitalist principles. While the US rewards its allies with economic and political benefits, it punishes its challengers through a range of political and economic measures, not least economic sanctions. Oil became a strategic international commodity in the post-World War II period, and began to play a pivotal role in the way the US maintained its global dominance. To do this, the US aimed to open up and transnationalise oil-rich economies in the Global South such as Saudi Arabia and Iran, to both promote its national interests and solidify its privileged position within the current system. Accordingly, the supply of Middle Eastern oil into international markets without disruption – and at a reasonable price – became an essential instrument for maintaining American dominance, even though the US didn’t need to import oil from the Middle East. A world of US dominance The political economist Susan Strange provided a theoretical framework back in 1987 to explain the structure of US dominance over the international system through four main dimensions: production, finance, security and knowledge. This is also a useful way to understand how the US shapes the international oil market – and the Saudi-Iranian rivalry. By 2018, in the wake of a shale boom, the US became the largest oil-producing country in the world by reaching production of 15 mbpd. Financially, oil has been priced and traded in US dollars, in particular since the early 1970s when a series of negotiations and agreements linking the sale of oil to the US dollar were made between Saudi Arabia and the US. This has increased global demand for US dollars, and helped the US deal with its trade deficit and keep its interest rates low. It has also helped the US to monitor the petroleum trade by controlling global bank transfers. The US also stands as a main security provider to oil-rich Gulf monarchies, with publicly acknowledged military bases in over 12 countries in the Middle East. Additionally, it has a supremacy over global knowledge, most obviously through its continued domination and control of the sector’s technological needs. By leading global innovation and technological development in the shale revolution, for example, and having the highest budget for research and development, the US largely controls global technology transfer. This has also deprived Iran of necessary technology, capital and know-how to modernise its ageing oil industry, constraining production. Therefore, despite the fact that the Saudi-Iranian oil rivalry seems like a regional issue, the role of American power in a globalised world has been key to shaping this regional political competition over oil. (Sukru Cildir is PhD Candidate, Lancaster University) (This article was originally published on The Conversation. Read the original article) (Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)

How Saudi-Iranian oil rivalry has been shaped by American power

Saudi Arabia wants to forge strong ties with India. This is a relationship rooted in the realm of political and economic realities.&nbsp;

Truth be told, strong ties will benefit both sides. India needs oil. What about the Saudis? Why has Riyadh prioritised Delhi?

What is the strategic significance? On WION Edit, we will explore these questions. First, let's tell you what India has been up to. Diversifying sources of energy.

PM Narendra Modi's government is credited for boosting India's ability to do this through multiple engagements. After US sanctions on Iran and Venezuela, India needed to secure its energy interests.&nbsp;

And Saudi Arabia was quick to fill the gaps. Right now, India imports 83 per cent of its oil needs and Saudi Arabia is the second-biggest supplier

So technically, access to Indian markets is a huge economic benefit for a country like Saudi Arabia - whose economy is fueled by oil. But that's not the only draw for Riyadh.

It is looking at the long term and India's growing clout. Here are some points to note:

Going forward, Saudi Arabia wants to rely less on its oil reserves. In March 2018, the Kingdom announced the largest renewables project ever, a solar push worth over 200 billion dollars.

That project failed to take off and was eventually. But Saudi Arabia has not given up its goal to move away from oil dependence. Recently, Riyadh tripled its renewable energy target. The focus is wind and solar energy, projects have been tendered.

So why does Saudi Arabia want to move away from oil? Because depending on oil is dangerous.

First, fluctuating prices hurt the Saudi economy. A drop in oil prices puts them under fiscal pressure. Two, as the world transitions towards clean and renewable energy, countries like Saudi Arabia will be hit hard.

So what can the Kingdom do? Shift to renewable energy. Insulate the economy from oil price shocks and as a buffer, establish ties with countries that import oil-- i.e. India.

Yes, countries will aggressively push for climate action in the coming years. But that doesn't imply a total ban on fossil fuel. At least for the next few decades.

And countries like India and China will have more energy needs as their economies expand. So Saudi Arabia will find no better importers than India and China during this transition period. Besides, India will be perfectly placed to help Saudi Arabia through the clean energy transition.

The solar market in India is robust and ever-growing, the synergies are also in India's favour.

Besides, Saudi investments in India are strategic. The return from Indian markets is one of the best in the world. And the economy is pegged to grow further in the coming decades.

This is the grand plan, Saudi investments in India are strategic and a win-win proposition for both. This relationship is no more about remittances or immediate gains. India is one of the biggest games in town and Saudi Arabia only knows it too well. 
 
(Disclaimer: WION Edit is the channel's take on the big events of the world) 
&nbsp;

Saudi Arabia wants to forge strong ties with India. This is a relationship rooted in the realm of political and economic realities. Truth be told, strong ties will benefit both sides.

Saudi Arabia wants to forge strong ties with India. This is a relationship rooted in the realm of political and economic realities. Truth be told, strong ties will benefit both sides. India needs oil. What about the Saudis? Why has Riyadh prioritised Delhi? What is the strategic significance? On WION Edit, we will explore these questions. First, let's tell you what India has been up to. Diversifying sources of energy. PM Narendra Modi's government is credited for boosting India's ability to do this through multiple engagements. After US sanctions on Iran and Venezuela, India needed to secure its energy interests. And Saudi Arabia was quick to fill the gaps. Right now, India imports 83 per cent of its oil needs and Saudi Arabia is the second-biggest supplier So technically, access to Indian markets is a huge economic benefit for a country like Saudi Arabia - whose economy is fueled by oil. But that's not the only draw for Riyadh. It is looking at the long term and India's growing clout. Here are some points to note: Going forward, Saudi Arabia wants to rely less on its oil reserves. In March 2018, the Kingdom announced the largest renewables project ever, a solar push worth over 200 billion dollars. That project failed to take off and was eventually. But Saudi Arabia has not given up its goal to move away from oil dependence. Recently, Riyadh tripled its renewable energy target. The focus is wind and solar energy, projects have been tendered. So why does Saudi Arabia want to move away from oil? Because depending on oil is dangerous. First, fluctuating prices hurt the Saudi economy. A drop in oil prices puts them under fiscal pressure. Two, as the world transitions towards clean and renewable energy, countries like Saudi Arabia will be hit hard. So what can the Kingdom do? Shift to renewable energy. Insulate the economy from oil price shocks and as a buffer, establish ties with countries that import oil-- i.e. India. Yes, countries will aggressively push for climate action in the coming years. But that doesn't imply a total ban on fossil fuel. At least for the next few decades. And countries like India and China will have more energy needs as their economies expand. So Saudi Arabia will find no better importers than India and China during this transition period. Besides, India will be perfectly placed to help Saudi Arabia through the clean energy transition. The solar market in India is robust and ever-growing, the synergies are also in India's favour. Besides, Saudi investments in India are strategic. The return from Indian markets is one of the best in the world. And the economy is pegged to grow further in the coming decades. This is the grand plan, Saudi investments in India are strategic and a win-win proposition for both. This relationship is no more about remittances or immediate gains. India is one of the biggest games in town and Saudi Arabia only knows it too well. (Disclaimer: WION Edit is the channel's take on the big events of the world)

Strong ties will benefit both India and Saudi Arabia

The all-India general Consumer Price Index (CPI) inflation was steady at 3.21% in August 2019, compared to 3.15% in July 2019. Core CPI inflation eased to 4.20 per cent in August 2019 compared with 4.25 per cent in July 2019. 
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Also, cumulative CPI inflation declined to 3.11 per cent in April-August of 2019-20 compared with 4.44 per cent in April-August 2018-19.

The war on inflation has been won decisively by the Narendra Modi led government, thanks to proactive management of the current account balance. The current account deficit (CAD) for 2018-19 stood at 2.1 per cent of GDP, just a tad higher than the 1.8 per cent for 2017-18.&nbsp;

India’s trade deficit increased to $180.3 billion in 2018-19 from $160 billion in 2017-18, largely due to higher oil import bill. Needless to add, global crude and local fuel prices will, therefore, be the fulcrum around which both CAD and domestic inflation will revolve.

The recent drone attacks on Saudi Arabia for instance, led to a 19.5% spike in global crude prices in barely 24 hours, shaving off 5 per cent from global supplies, showcasing how volatile global oil prices can be. Every dollar increase in the price of oil raises India’s import bill by about Rs. 10,700 crore on an annualised basis. India spent $111.9 billion on oil imports in 2018-19.

Also, a 10 per cent spike in crude prices can result in roughly a 0.2-0.40 per cent widening of the CAD, other things remaining constant. This, in turn, can play out into a 2-4 per cent depreciation in the rupee and also push up inflation by 0.1-0.2 per cent.

India’s crude imports averaged 4.5 million barrels per day over the first seven months of this year, of which close to 20 per cent was from Saudi Arabia. While prima facie India may therefore seem vulnerable, the truth is we have enough strategic petroleum reserves (SPRs) and commercial crude stocks as cushion.

Again, India has oil reserves equivalent to at least 75 days of net imports. This will increase further to 87 days once the second phase of Indian Strategic Petroleum Reserves (ISPRs), which aims to add 12 days’ of crude storage, is fully operational. This includes the refineries’ inbuilt capacity of 65 days.

Concerns have been voiced about India stopping oil imports from Iran since May 2019. Iran used to meet a tenth of our crude demand, making India the third largest customer for the Persian country. The challenge to find alternate suppliers who will be able to deliver at competitive prices is, however, not a problem in the new oil polity that has taken shape in the past few years.

During the Iranian Revolution of 1979 and Iraq’s invasion of Kuwait in 1990, India suffered. In the case of the Gulf War, there was added impact of Indian workers returning home, straining India’s balance of payments. However India in 2019, under the powerful leadership of Narendra Modi, commands and negotiates from a position of strength.

For instance, the CAD for the June 2019 quarter contracted on a Y-o-y basis on account of higher invisible receipts at $ 31.9 billion as compared with $ 29.9 billion a year ago.

Net services receipts increased by 7.3 per cent on a Y-o-y basis, mainly on the back of a rise in net earnings from travel, financial services and telecommunications, computer and information services. Private transfer receipts, mainly representing remittances by Indians employed overseas, rose to $ 19.9 billion, increasing by 6.2 per cent from their level a year ago in the same quarter.

Lower oil prices in the past few years have significantly improved India’s terms of trade, giving it ample leeway. The cost of the Indian basket of crude, which averaged $47.56 and $56.43 a barrel in 2016-17 and 2017-18, was $59.35 in August 2019, according to data from the Petroleum Planning and Analysis Cell.&nbsp;

The average price inched up marginally to $59.35 a barrel on September 13, 2019, &nbsp;and this despite heightened global tensions between US and China, Saudi Arabia and Iran, Yemen and Houthi rebels and of course the standoff between UK and Iran, amidst the festering Brexit crisis. It is worth noting that the Indian basket of crude represents the average of Oman, Dubai and Brent Crude.

Despite Russia, China and Turkey continuing their oil-related engagements with Iran, much to the consternation of the US, India engineered a diplomatic coup of sorts by stopping imports from Iran and earning a strong ally in the Trump administration.

By the end of 2019, the United States will become a net energy exporter, shipping out 1.1 million barrels more than it imports. US had been a net energy importer since 1953. But oil production there will now rise until 2027 when it levels off at around 30 million barrels per day. With the US pumping crude at record levels, any deficit by Iran will be filled in suitably.&nbsp;

The oil industry has changed fundamentally as sell. Global oil demand only increased by 1.6% in 2017 and 1.3% in 2018, according to the International Energy Administration.

Most of the increase came from China, which now consumes 13% of global oil production but that number is slated to fall sharply due to the country’s slowing growth. &nbsp;Again, to the Modi government’s credit, it executed a $75 billion bilateral currency swap agreement with Japan in October 2018, for payments to be settled in Yen and Rupees, eliminating the need to use Dollars as a medium of exchange, with another one executed with UAE, to trade in Rupees and Dirham.&nbsp;

These measures to maintain a comfortable forex kitty hit a high of $434.6 billion in October 2019 and will ensure India is no longer subjected to the whims and fancies of a rapidly changing global dynamic that is no longer greased by the oil wells in Ghawar, but by the bountiful wells in the Gulf of Mexico

(This article was originally published on The DNA. Read the <a href="https://www.dnaindia.com/analysis/column-mexican-gulf-not-ghawar-wells-2795440">original article</a>)

(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL) &nbsp;

 
&nbsp;

The all-India general Consumer Price Index (CPI) inflation was steady at 3.21% in August 2019, compared to 3.15% in July 2019. Core CPI inflation eased to 4.20 per cent in August 2019 compared with 4.

The all-India general Consumer Price Index (CPI) inflation was steady at 3.21% in August 2019, compared to 3.15% in July 2019. Core CPI inflation eased to 4.20 per cent in August 2019 compared with 4.25 per cent in July 2019. Advertisement Also, cumulative CPI inflation declined to 3.11 per cent in April-August of 2019-20 compared with 4.44 per cent in April-August 2018-19. The war on inflation has been won decisively by the Narendra Modi led government, thanks to proactive management of the current account balance. The current account deficit (CAD) for 2018-19 stood at 2.1 per cent of GDP, just a tad higher than the 1.8 per cent for 2017-18. India’s trade deficit increased to $180.3 billion in 2018-19 from $160 billion in 2017-18, largely due to higher oil import bill. Needless to add, global crude and local fuel prices will, therefore, be the fulcrum around which both CAD and domestic inflation will revolve. The recent drone attacks on Saudi Arabia for instance, led to a 19.5% spike in global crude prices in barely 24 hours, shaving off 5 per cent from global supplies, showcasing how volatile global oil prices can be. Every dollar increase in the price of oil raises India’s import bill by about Rs. 10,700 crore on an annualised basis. India spent $111.9 billion on oil imports in 2018-19. Also, a 10 per cent spike in crude prices can result in roughly a 0.2-0.40 per cent widening of the CAD, other things remaining constant. This, in turn, can play out into a 2-4 per cent depreciation in the rupee and also push up inflation by 0.1-0.2 per cent. India’s crude imports averaged 4.5 million barrels per day over the first seven months of this year, of which close to 20 per cent was from Saudi Arabia. While prima facie India may therefore seem vulnerable, the truth is we have enough strategic petroleum reserves (SPRs) and commercial crude stocks as cushion. Again, India has oil reserves equivalent to at least 75 days of net imports. This will increase further to 87 days once the second phase of Indian Strategic Petroleum Reserves (ISPRs), which aims to add 12 days’ of crude storage, is fully operational. This includes the refineries’ inbuilt capacity of 65 days. Concerns have been voiced about India stopping oil imports from Iran since May 2019. Iran used to meet a tenth of our crude demand, making India the third largest customer for the Persian country. The challenge to find alternate suppliers who will be able to deliver at competitive prices is, however, not a problem in the new oil polity that has taken shape in the past few years. During the Iranian Revolution of 1979 and Iraq’s invasion of Kuwait in 1990, India suffered. In the case of the Gulf War, there was added impact of Indian workers returning home, straining India’s balance of payments. However India in 2019, under the powerful leadership of Narendra Modi, commands and negotiates from a position of strength. For instance, the CAD for the June 2019 quarter contracted on a Y-o-y basis on account of higher invisible receipts at $ 31.9 billion as compared with $ 29.9 billion a year ago. Net services receipts increased by 7.3 per cent on a Y-o-y basis, mainly on the back of a rise in net earnings from travel, financial services and telecommunications, computer and information services. Private transfer receipts, mainly representing remittances by Indians employed overseas, rose to $ 19.9 billion, increasing by 6.2 per cent from their level a year ago in the same quarter. Lower oil prices in the past few years have significantly improved India’s terms of trade, giving it ample leeway. The cost of the Indian basket of crude, which averaged $47.56 and $56.43 a barrel in 2016-17 and 2017-18, was $59.35 in August 2019, according to data from the Petroleum Planning and Analysis Cell. The average price inched up marginally to $59.35 a barrel on September 13, 2019, and this despite heightened global tensions between US and China, Saudi Arabia and Iran, Yemen and Houthi rebels and of course the standoff between UK and Iran, amidst the festering Brexit crisis. It is worth noting that the Indian basket of crude represents the average of Oman, Dubai and Brent Crude. Despite Russia, China and Turkey continuing their oil-related engagements with Iran, much to the consternation of the US, India engineered a diplomatic coup of sorts by stopping imports from Iran and earning a strong ally in the Trump administration. By the end of 2019, the United States will become a net energy exporter, shipping out 1.1 million barrels more than it imports. US had been a net energy importer since 1953. But oil production there will now rise until 2027 when it levels off at around 30 million barrels per day. With the US pumping crude at record levels, any deficit by Iran will be filled in suitably. The oil industry has changed fundamentally as sell. Global oil demand only increased by 1.6% in 2017 and 1.3% in 2018, according to the International Energy Administration. Most of the increase came from China, which now consumes 13% of global oil production but that number is slated to fall sharply due to the country’s slowing growth. Again, to the Modi government’s credit, it executed a $75 billion bilateral currency swap agreement with Japan in October 2018, for payments to be settled in Yen and Rupees, eliminating the need to use Dollars as a medium of exchange, with another one executed with UAE, to trade in Rupees and Dirham. These measures to maintain a comfortable forex kitty hit a high of $434.6 billion in October 2019 and will ensure India is no longer subjected to the whims and fancies of a rapidly changing global dynamic that is no longer greased by the oil wells in Ghawar, but by the bountiful wells in the Gulf of Mexico (This article was originally published on The DNA. Read the original article) (Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)

Dexterous management of India’s fuel reserves is one of the success stories of government

Neither Saudi Arabia nor the United States is rushing to retaliate for a brazen, allegedly Iranian attack that severely damaged two of the kingdom’s key oil facilities.

That is not to say that Saudi Arabia or the United States will not retaliate in what could prove to be a game-changer in the geopolitics of the Middle East.

Yet, reading the tea leaves of various US and Saudi statements lifts the veil on the constituent elements that could change the region’s dynamics.

They also shine a spotlight on the pressures on both countries and shifts in the US-Saudi relationship that could have long-lasting consequences.

With US Secretary of State Mike Pompeo visiting the kingdom to coordinate what his office described as efforts to combat "Iranian aggression in the region," Saudi Arabia and the United States will be seeking to resolve multiple issues.

These include collecting sufficient evidence to convincingly apportion blame; calibrating a response that would be appropriate but not drag the United States and the Middle East into a war that few want; deciding who takes the lead in any military response and managing the long-term impact of that &nbsp;decision on Saudi-US relations and the US commitment to the region.

A careful reading of Saudi and US responses to the attacks so far suggests subtle differences between the two. They mask fundamental issues that have emerged in the aftermath of the attacks.

For starters, Pompeo and President Donald J Trump have explicitly pointed the finger at Iran as being directly responsible, while Saudi Arabia stopped short of blaming the Islamic republic, saying that its preliminary findings show that Iranian weapons were used in the attack. Iran has denied any involvement.

The discrepancy in the initial apportioning of blame raises the question whether Saudi Arabia is seeking to avoid being manoeuvred into a situation in which it would be forced to take the lead in retaliating against the Islamic republic with strikes against targets in Iran rather than Yemen.

Political scientist Austin Carson suggests that Saudi Arabia may have an interest in at least partially playing along with Iranian insistence that it was not responsible. “Allowing Iran’s role to remain ambiguous could reduce Saudi leaders’ need to appear strong. The Saudis are reportedly unconvinced by shared US intelligence that attempts to link the attacks to Iran’s territory. Some experts suggest this may reflect a more cautious approach to escalation,” Carson wrote in The Washington Post.

Saudi Arabia’s initial reluctance to unambiguously blame Iran may have a lot to do with Trump’s America First-driven response to the attacks that appeared to contradict the Carter Doctrine proclaimed in 1980 by President Jimmy Carter.

The doctrine, a cornerstone of the Saudi-US relationship, stated that the United States would use military force, if necessary, to defend its national interests in the Gulf.

Trump’s apparent weakening of the United States’ commitment to the defence of the kingdom, encapsulated in the doctrine, risks fundamentally altering the relationship, already troubled by Saudi conduct of the more than four-year-long war in Yemen and last year’s killing of journalist Jamal Khashoggi in the Saudi consulate in Istanbul.

Signalling a break with the Carter doctrine, Trump was quick to point out that the attacks were on Saudi Arabia, not on the United States, and suggested that it was for the Saudis to respond.

“I haven’t promised Saudis that. We have to sit down with the Saudis and work something out. That was an attack on Saudi Arabia, and that wasn’t an attack on us. But we would certainly help them,” Trump said without identifying what kind of support the US would be willing to provide.

Despite blustering that the United States was “locked and loaded,” Trump insisted that “We have a lot of options but I’m not looking at options right now.”

Trump’s response to a tweet by US Senator Lindsey Graham, a friend of the president who favours a US military strike against Iran, that "the measured response by President @realDonaldTrump…was clearly seen by the Iranian regime as a sign of weakness" was equally telling.

"No Lindsey, it was a sign of strength that some people just don't understand," Trump said.

Trump further called into question the nature of the US-Saudi defence relationship by declaring that “If we decide to do something, they’ll be very much involved, and that includes payment. And they understand that fully.”

The Saudi foreign ministry maintained, with the attacks casting doubt on the Saudi military’s ability to defend the kingdom’s oil assets and Trump seemingly putting the onus of a response on Saudi Arabia, that “The kingdom is capable of defending its land and people and responding forcefully to those attacks.” &nbsp;&nbsp;

Only indisputable evidence that the drones were launched from Iranian territory would incontrovertibly point the finger at Iran.

So far, the Saudis have stopped short of that while US officials have suggested that the drones were launched either from Iran or by pro-Iranian militias in southern Iraq.

Holding Iran responsible for the actions of a militia, whether in Iraq or Yemen, could prove more tricky given long-standing questions about the degree of control that Iran has over various groups that it supports, and particularly regarding the Houthis.

The argument could turn out to be a slippery slope given that by the same logic, the United States would be responsible for massive human casualties in the Yemen war resulting from Saudi use of American weaponry.

Military retaliation may not be immediate even if the United States and Saudi Arabia can produce convincing evidence that Iran was directly responsible.

"No knee jerk reactions to this - it's very systematic - what happens with patience is it prevents stupid moves," a US official said.

The United States is likely to attempt to first leverage that evidence in meetings on the sidelines of next week’s United Nations General Assembly to convince the international community, and particularly the Europeans, to drop opposition to last year’s US withdrawal from the international nuclear accord with Iran and the harsh economic sanctions that the Trump administration has since imposed on Iran.

Both the United States and Saudi Arabia will also want to use the opportunity of the UN gathering to try to ensure that the fallout of any military response is limited and does not escalate into a full-fledged war that could change the geopolitical map of the Middle East.

Said foreign policy analyst Steven A Cook: “How the Trump administration responds will indicate whether US elites still consider energy resources a core national interest and whether the United States truly is on its way out of the Middle East entirely, as so many in the region suspect.” 
 
(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)&nbsp;

Neither Saudi Arabia nor the United States is rushing to retaliate for a brazen, allegedly Iranian attack that severely damaged two of the kingdom’s key oil facilities.

Neither Saudi Arabia nor the United States is rushing to retaliate for a brazen, allegedly Iranian attack that severely damaged two of the kingdom’s key oil facilities. That is not to say that Saudi Arabia or the United States will not retaliate in what could prove to be a game-changer in the geopolitics of the Middle East. Yet, reading the tea leaves of various US and Saudi statements lifts the veil on the constituent elements that could change the region’s dynamics. They also shine a spotlight on the pressures on both countries and shifts in the US-Saudi relationship that could have long-lasting consequences. With US Secretary of State Mike Pompeo visiting the kingdom to coordinate what his office described as efforts to combat "Iranian aggression in the region," Saudi Arabia and the United States will be seeking to resolve multiple issues. These include collecting sufficient evidence to convincingly apportion blame; calibrating a response that would be appropriate but not drag the United States and the Middle East into a war that few want; deciding who takes the lead in any military response and managing the long-term impact of that decision on Saudi-US relations and the US commitment to the region. A careful reading of Saudi and US responses to the attacks so far suggests subtle differences between the two. They mask fundamental issues that have emerged in the aftermath of the attacks. For starters, Pompeo and President Donald J Trump have explicitly pointed the finger at Iran as being directly responsible, while Saudi Arabia stopped short of blaming the Islamic republic, saying that its preliminary findings show that Iranian weapons were used in the attack. Iran has denied any involvement. The discrepancy in the initial apportioning of blame raises the question whether Saudi Arabia is seeking to avoid being manoeuvred into a situation in which it would be forced to take the lead in retaliating against the Islamic republic with strikes against targets in Iran rather than Yemen. Political scientist Austin Carson suggests that Saudi Arabia may have an interest in at least partially playing along with Iranian insistence that it was not responsible. “Allowing Iran’s role to remain ambiguous could reduce Saudi leaders’ need to appear strong. The Saudis are reportedly unconvinced by shared US intelligence that attempts to link the attacks to Iran’s territory. Some experts suggest this may reflect a more cautious approach to escalation,” Carson wrote in The Washington Post. Saudi Arabia’s initial reluctance to unambiguously blame Iran may have a lot to do with Trump’s America First-driven response to the attacks that appeared to contradict the Carter Doctrine proclaimed in 1980 by President Jimmy Carter. The doctrine, a cornerstone of the Saudi-US relationship, stated that the United States would use military force, if necessary, to defend its national interests in the Gulf. Trump’s apparent weakening of the United States’ commitment to the defence of the kingdom, encapsulated in the doctrine, risks fundamentally altering the relationship, already troubled by Saudi conduct of the more than four-year-long war in Yemen and last year’s killing of journalist Jamal Khashoggi in the Saudi consulate in Istanbul. Signalling a break with the Carter doctrine, Trump was quick to point out that the attacks were on Saudi Arabia, not on the United States, and suggested that it was for the Saudis to respond. “I haven’t promised Saudis that. We have to sit down with the Saudis and work something out. That was an attack on Saudi Arabia, and that wasn’t an attack on us. But we would certainly help them,” Trump said without identifying what kind of support the US would be willing to provide. Despite blustering that the United States was “locked and loaded,” Trump insisted that “We have a lot of options but I’m not looking at options right now.” Trump’s response to a tweet by US Senator Lindsey Graham, a friend of the president who favours a US military strike against Iran, that "the measured response by President @realDonaldTrump…was clearly seen by the Iranian regime as a sign of weakness" was equally telling. "No Lindsey, it was a sign of strength that some people just don't understand," Trump said. Trump further called into question the nature of the US-Saudi defence relationship by declaring that “If we decide to do something, they’ll be very much involved, and that includes payment. And they understand that fully.” The Saudi foreign ministry maintained, with the attacks casting doubt on the Saudi military’s ability to defend the kingdom’s oil assets and Trump seemingly putting the onus of a response on Saudi Arabia, that “The kingdom is capable of defending its land and people and responding forcefully to those attacks.” Only indisputable evidence that the drones were launched from Iranian territory would incontrovertibly point the finger at Iran. So far, the Saudis have stopped short of that while US officials have suggested that the drones were launched either from Iran or by pro-Iranian militias in southern Iraq. Holding Iran responsible for the actions of a militia, whether in Iraq or Yemen, could prove more tricky given long-standing questions about the degree of control that Iran has over various groups that it supports, and particularly regarding the Houthis. The argument could turn out to be a slippery slope given that by the same logic, the United States would be responsible for massive human casualties in the Yemen war resulting from Saudi use of American weaponry. Military retaliation may not be immediate even if the United States and Saudi Arabia can produce convincing evidence that Iran was directly responsible. "No knee jerk reactions to this - it's very systematic - what happens with patience is it prevents stupid moves," a US official said. The United States is likely to attempt to first leverage that evidence in meetings on the sidelines of next week’s United Nations General Assembly to convince the international community, and particularly the Europeans, to drop opposition to last year’s US withdrawal from the international nuclear accord with Iran and the harsh economic sanctions that the Trump administration has since imposed on Iran. Both the United States and Saudi Arabia will also want to use the opportunity of the UN gathering to try to ensure that the fallout of any military response is limited and does not escalate into a full-fledged war that could change the geopolitical map of the Middle East. Said foreign policy analyst Steven A Cook: “How the Trump administration responds will indicate whether US elites still consider energy resources a core national interest and whether the United States truly is on its way out of the Middle East entirely, as so many in the region suspect.” (Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)

Saudi oil attacks put US commitments to the test

Saudi Arabia is involved in several proxy wars in the region and continues to make a mockery of rights.

But even then, countries like the US, which have been directly affected by the terror exports from Saudi, continue to support Saudi Arabia.

The reason is oil and Saudi Arabia has loads of it. Simply put - it's Petro-Islam.

So, how long will Saudi Arabia get a free pass and a pat on the back for being the breeding ground of terrorism?

There is no clear answer because the world runs on oil. On Wion Edit, we discuss the need to find alternatives for oil.

Importers cannot continue to face supply disruption due to the crisis in West Asia.

Countries like India have diversified their oil procurement in an attempt to stay insulated from supply issues. But that's at best - a stop-gap solution.

If you look at the oil producers, with the exception of the US and Russia, most countries are facing turmoil.

Venezuela, Nigeria, Iran, Iraq, Qatar and now Saudi Arabia. All these countries face threats of terrorism.

And this will only intensify and&nbsp;lead to more disputes over this crucial commodity. Depending on crude, therefore, is an economic risk in the medium to long term.

Several countries are moving towards generating power entirely through renewable energy sources. Countries like Denmark, Iceland, Sweden, Nicaragua, Germany are well on course to achieving independence from oil.

That means that these countries need not worry about political disruptions in countries like Saudi Arabia.

Besides&nbsp;this, the transition is cost-effective too.

Over the last few years, India has come a long way in its push for renewable energy. Right now, the share of renewable energy in India is above 20 per cent. The government should continue this transition more aggressively.

This will help India escape the wrath of OPEC cartel.&nbsp;

The sooner&nbsp;countries find alternatives to oil, the better it will be for economic autonomy. Besides, it will help in ending the many conflicts in West Asia.

The only way to end the radical Petro-Islam is to achieve independence from oil. 
 
(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)

Saudi Arabia is involved in several proxy wars in the region and continues to make a mockery of rights. But even then, countries like the US, which have been directly affected by the terror exports from Saudi, continue to support Saudi Arabia.

Saudi Arabia is involved in several proxy wars in the region and continues to make a mockery of rights. But even then, countries like the US, which have been directly affected by the terror exports from Saudi, continue to support Saudi Arabia. The reason is oil and Saudi Arabia has loads of it. Simply put - it's Petro-Islam. So, how long will Saudi Arabia get a free pass and a pat on the back for being the breeding ground of terrorism? There is no clear answer because the world runs on oil. On Wion Edit, we discuss the need to find alternatives for oil. Importers cannot continue to face supply disruption due to the crisis in West Asia. Countries like India have diversified their oil procurement in an attempt to stay insulated from supply issues. But that's at best - a stop-gap solution. If you look at the oil producers, with the exception of the US and Russia, most countries are facing turmoil. Venezuela, Nigeria, Iran, Iraq, Qatar and now Saudi Arabia. All these countries face threats of terrorism. And this will only intensify and lead to more disputes over this crucial commodity. Depending on crude, therefore, is an economic risk in the medium to long term. Several countries are moving towards generating power entirely through renewable energy sources. Countries like Denmark, Iceland, Sweden, Nicaragua, Germany are well on course to achieving independence from oil. That means that these countries need not worry about political disruptions in countries like Saudi Arabia. Besides this, the transition is cost-effective too. Over the last few years, India has come a long way in its push for renewable energy. Right now, the share of renewable energy in India is above 20 per cent. The government should continue this transition more aggressively. This will help India escape the wrath of OPEC cartel. The sooner countries find alternatives to oil, the better it will be for economic autonomy. Besides, it will help in ending the many conflicts in West Asia. The only way to end the radical Petro-Islam is to achieve independence from oil. (Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)

WION Edit: Achieving independence from oil

Mounting signs of an economic slowdown and a ratcheting up of the US-China trade war have caused global oil demand to grow at its slowest pace since the financial crisis of 2008, the International Energy Agency (IEA) said on Friday.

Mounting signs of an economic slowdown and a ratcheting up of the US-China trade war have caused global oil demand to grow at its slowest pace since the financial crisis of 2008, the International Energy Agency (IEA) said on Friday. "The situation is becoming even more uncertain, global oil demand growth has been very sluggish in the first half of 2019," the IEA said in its monthly report. The Paris-based agency said that compared with the same month in 2018, global demand fell by 160,000 barrels per day (BPD) in May the second year-on-year fall of 2019. From January to May, oil demand increased by 520,000 BPD, marking the lowest rise for that period since 2008. "The prospects for a political agreement between China and the United States on trade have worsened. This could lead to reduced trade activity and less oil demand growth," the IEA said. Lowering its global demand growth forecasts for 2019 and 2020 to 1.1 million and 1.3 million BPD, respectively, the IEA cited China as the only major source of growth at 500,000 BPD for the first half of this year. Demand growth in the United States and India was just 100,000 BPD from January to June, it said. "The outlook is fragile with a greater likelihood of a downward revision than an upward one," the report said. Supply curbs by the Organization of the Petroleum Exporting Countries and its allies, meanwhile, had tightened the oil market, helped by slower non-OPEC production. But the IEA said that balance would be temporary as it forecast robust non-OPEC production growth in 2020 at 2.2 million BPD, predicting the global oil market would be "well supplied". The IEA said economic concerns were overshadowing geopolitics, but the oil market continued to watch closely the tensions between the United States and Iran in the Gulf. US sanctions drove down Tehran's July exports of crude oil by 130,000 BPD to 400,000 BPD, the lowest since the 1980s.

Oil demand growth at lowest since 2008: International Energy Agency

Indian companies are increasingly eyeing Mongolia's oil and gas sector with first every exhibition on the energy sector with the participation of several companies and an agreement on an India built a Mongolian oil refinery.&nbsp;

Engineers India Ltd (EIL) and Mongolia's Mongol Refinery have signed an agreement on the Project Management Consultancy (PMC) for setting up of the first oil refinery in the eastern province of DornoGobi. The agreement was signed in the presence of Mongolian Minister of Mining Dolgorsürengiin Sumyaabazar and the Ambassador of India to Mongolia MP Singh.

India will help build Mongolia's second oil refinery and has extended a $1 billion Line of Credit to the country for it. The refinery will be built in the city of Sainshand in Dornogobi province and will have a capacity of 1.5 MMTPA which will be implemented with Exim Bank funding.

During the visit, Prime Minister Narendra Modi's 2015 visit to the country, which was the first ever visit of an Indian PM to the landlocked country, $1 billion credit line was announced which is being used to build the first ever oil refinery for the country. Last year Mongolian PM Ukhnaagiin Khürelsükh and Home Minister Rajnath Singh took part in the groundbreaking ceremony for that Oil Refinery. It is expected to be completed by mid-2023.&nbsp;

In a bid to increase engagement between oil and gas companies to both countries, EIL along with Mongol Refinery and Ministry of Mining of Mongolia earlier this week organised an exhibition in Mongolia and saw the participation of Mongolian Foreign Minister Oyun-Erdene, along with Mongolian Minister of Mining Dolgorsürengiin Sumyaabazar and head of Cabinet Secretariat.

G Ganbold, Mongolia's ambassador to India told WION, " Around 35 Indian companies participated in the exhibition. Mongolia government and business community showed interest in working with Indian companies. There will be second expo in August in which Indian pharma companies will participate."

Mongolia currently exports crude oil to China and imports petroleum products from Russia. India led refineries will help Ulaanbaatar reduce its dependency on Moscow and Beijing. According to the Petroleum Authority of Mongolia, the country has reserves of 2.3 billion barrels of oil.

There has been a number of high-level visits from India to Mongolia including a visit by External Affairs Minister Sushma Swaraj and Home minister Rajnath Singh to the country.&nbsp;

While Mongolia sees India as its third neighbour and a spiritual neighbour and New Delhi wants to realise the huge potential of bilateral relations with the country. India was the first country to establish diplomatic relations with Mongolia after it came out of Communist Bloc.

Indian companies are increasingly eyeing Mongolia's oil and gas sector with first every exhibition on the energy sector with the participation of several companies and an agreement on an India built a Mongolian oil refinery.

Indian companies are increasingly eyeing Mongolia's oil and gas sector with first every exhibition on the energy sector with the participation of several companies and an agreement on an India built a Mongolian oil refinery. Engineers India Ltd (EIL) and Mongolia's Mongol Refinery have signed an agreement on the Project Management Consultancy (PMC) for setting up of the first oil refinery in the eastern province of DornoGobi. The agreement was signed in the presence of Mongolian Minister of Mining Dolgorsürengiin Sumyaabazar and the Ambassador of India to Mongolia MP Singh. India will help build Mongolia's second oil refinery and has extended a $1 billion Line of Credit to the country for it. The refinery will be built in the city of Sainshand in Dornogobi province and will have a capacity of 1.5 MMTPA which will be implemented with Exim Bank funding. During the visit, Prime Minister Narendra Modi's 2015 visit to the country, which was the first ever visit of an Indian PM to the landlocked country, $1 billion credit line was announced which is being used to build the first ever oil refinery for the country. Last year Mongolian PM Ukhnaagiin Khürelsükh and Home Minister Rajnath Singh took part in the groundbreaking ceremony for that Oil Refinery. It is expected to be completed by mid-2023. In a bid to increase engagement between oil and gas companies to both countries, EIL along with Mongol Refinery and Ministry of Mining of Mongolia earlier this week organised an exhibition in Mongolia and saw the participation of Mongolian Foreign Minister Oyun-Erdene, along with Mongolian Minister of Mining Dolgorsürengiin Sumyaabazar and head of Cabinet Secretariat. G Ganbold, Mongolia's ambassador to India told WION, " Around 35 Indian companies participated in the exhibition. Mongolia government and business community showed interest in working with Indian companies. There will be second expo in August in which Indian pharma companies will participate." Mongolia currently exports crude oil to China and imports petroleum products from Russia. India led refineries will help Ulaanbaatar reduce its dependency on Moscow and Beijing. According to the Petroleum Authority of Mongolia, the country has reserves of 2.3 billion barrels of oil. There has been a number of high-level visits from India to Mongolia including a visit by External Affairs Minister Sushma Swaraj and Home minister Rajnath Singh to the country. While Mongolia sees India as its third neighbour and a spiritual neighbour and New Delhi wants to realise the huge potential of bilateral relations with the country. India was the first country to establish diplomatic relations with Mongolia after it came out of Communist Bloc.

Indian companies eyes Mongolia's oil and gas sector

By Nafis Alam

The US has unnerved the world oil market by ramping up the pressure in its long-running dispute with Iran. It has announced that, after May 1, it won’t renew the exemptions given to eight countries that enable them to buy Iranian oil. Those affected, which include China, India, Japan, Italy and South Korea, will face sanctions from Washington if they don’t comply. The move will likely squeeze global oil supply at a time when it is already struggling from disruptions in Venezuela, Libya and Nigeria. Indeed, the Brent crude price has already risen on the back of the announcement to $74 (£57) per barrel, the highest since last November.

President Donald Trump has said he is confident that a supply crunch can be avoided thanks to extra output from Saudi Arabia and the United Arab Emirates, but traders and Asian petrochemical firms are sceptical that these countries will fully comply. In recent months, Saudi Arabia and other OPEC members have cut supply dramatically to redress their fears that hefty US shale oil output and declining global energy demand could cause a supply glut that would batter prices.

In December the oil cartel, along with Russia and other allies, agreed to reduce output by 1.2m barrels per day (bpd), cutting the global total volume by more than 1 per cent. They have since exceeded those benchmarks, with Saudi Arabia alone reducing supply by 800,000 bpd in total. In March the kingdom slashed production to a four-year low of 9.82m bpd, making up the majority of OPEC’s reduction of 295,000 daily barrels for the month to 30.3m bpd.

Oil politics

Trump has already been calling on OPEC to raise production, with little success. The Saudis may be close allies of the Americans, but they will only act in concert with their OPEC counterparts and many around the table will be wary of risking reducing prices at an unpredictable time for the global economy.

No one ever forgets when the Saudis famously went against Western interests in the Arab Oil Embargo of 1973, in response to US policies with similarly global consequences: President Richard Nixon had scrapped the gold standard, heavily devaluing the US dollar, and then backed the Israelis in the Yom Kippur war against Egypt. Inflation-adjusted oil prices nearly doubled during the embargo from around US$26 per barrel in 1973 to over $46 per barrel the following year, sending economic shockwaves around the world.

America’s latest move against Iran is making things worse for the global economy at a time when it has already been under pressure from rising interest rates and trade wars. If Iran’s entire output were removed – a big if since it is far from certain that all countries will comply with the Americans – it would wipe another 1m bpd or so off the world supply.

Any resulting rise in oil prices would spread to other commodity prices, leading to inflationary pressure – particularly in countries affected by the end of waiver such as India, where inflation has already started picking up. Such countries would also see direct effects on their import bill and hence their balance of trade. For every dollar increase in oil rates in India, for instance, the import bill will rise by R110 billion (£1.2 billion) at a time when the country’s trade deficit already stands at over £8 billion.

In many cases, such economic effects are all too capable of being exported. Take South Korea, which is the second biggest oil importer from Iran after China. South Korea mainly imports condensate, an ultra-light form of crude oil used for petrochemical products like naptha which it exports to neighbouring countries. If these petrochemical exports fall because Korean prices are no longer competitive, its neighbours will have to look further afield, creating a trade imbalance in the region.

In the run-up to Trump’s campaign to be re-elected for a second presidential term next year – assuming he makes it that far – there is therefore a great deal riding on this US gambit. If OPEC does not step up to the plate, and the oil price continues surging upwards, it could yet become the moment when the longstanding fears around the health of the world economy finally crystallise into a full-blown downturn.

(Nafis Alam is Associate Professor, University of Reading)

(This article was originally published on The Conversation. Read the <a href="https://theconversation.com/trumps-crackdown-on-irans-oil-exports-could-backfire-badly-with-serious-risks-to-global-economy-115852">original article)</a>

(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL.) 
&nbsp; 
&nbsp;

By Nafis Alam The US has unnerved the world oil market by ramping up the pressure in its long-running dispute with Iran. It has announced that, after May 1, it won’t renew the exemptions given to eight countries that enable them to buy Iranian oil.

By Nafis Alam The US has unnerved the world oil market by ramping up the pressure in its long-running dispute with Iran. It has announced that, after May 1, it won’t renew the exemptions given to eight countries that enable them to buy Iranian oil. Those affected, which include China, India, Japan, Italy and South Korea, will face sanctions from Washington if they don’t comply. The move will likely squeeze global oil supply at a time when it is already struggling from disruptions in Venezuela, Libya and Nigeria. Indeed, the Brent crude price has already risen on the back of the announcement to $74 (£57) per barrel, the highest since last November. President Donald Trump has said he is confident that a supply crunch can be avoided thanks to extra output from Saudi Arabia and the United Arab Emirates, but traders and Asian petrochemical firms are sceptical that these countries will fully comply. In recent months, Saudi Arabia and other OPEC members have cut supply dramatically to redress their fears that hefty US shale oil output and declining global energy demand could cause a supply glut that would batter prices. In December the oil cartel, along with Russia and other allies, agreed to reduce output by 1.2m barrels per day (bpd), cutting the global total volume by more than 1 per cent. They have since exceeded those benchmarks, with Saudi Arabia alone reducing supply by 800,000 bpd in total. In March the kingdom slashed production to a four-year low of 9.82m bpd, making up the majority of OPEC’s reduction of 295,000 daily barrels for the month to 30.3m bpd. Oil politics Trump has already been calling on OPEC to raise production, with little success. The Saudis may be close allies of the Americans, but they will only act in concert with their OPEC counterparts and many around the table will be wary of risking reducing prices at an unpredictable time for the global economy. No one ever forgets when the Saudis famously went against Western interests in the Arab Oil Embargo of 1973, in response to US policies with similarly global consequences: President Richard Nixon had scrapped the gold standard, heavily devaluing the US dollar, and then backed the Israelis in the Yom Kippur war against Egypt. Inflation-adjusted oil prices nearly doubled during the embargo from around US$26 per barrel in 1973 to over $46 per barrel the following year, sending economic shockwaves around the world. America’s latest move against Iran is making things worse for the global economy at a time when it has already been under pressure from rising interest rates and trade wars. If Iran’s entire output were removed – a big if since it is far from certain that all countries will comply with the Americans – it would wipe another 1m bpd or so off the world supply. Any resulting rise in oil prices would spread to other commodity prices, leading to inflationary pressure – particularly in countries affected by the end of waiver such as India, where inflation has already started picking up. Such countries would also see direct effects on their import bill and hence their balance of trade. For every dollar increase in oil rates in India, for instance, the import bill will rise by R110 billion (£1.2 billion) at a time when the country’s trade deficit already stands at over £8 billion. In many cases, such economic effects are all too capable of being exported. Take South Korea, which is the second biggest oil importer from Iran after China. South Korea mainly imports condensate, an ultra-light form of crude oil used for petrochemical products like naptha which it exports to neighbouring countries. If these petrochemical exports fall because Korean prices are no longer competitive, its neighbours will have to look further afield, creating a trade imbalance in the region. In the run-up to Trump’s campaign to be re-elected for a second presidential term next year – assuming he makes it that far – there is therefore a great deal riding on this US gambit. If OPEC does not step up to the plate, and the oil price continues surging upwards, it could yet become the moment when the longstanding fears around the health of the world economy finally crystallise into a full-blown downturn. (Nafis Alam is Associate Professor, University of Reading) (This article was originally published on The Conversation. Read the original article) (Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL.)

Donald Trump’s crackdown on Iran’s oil exports could backfire badly – with serious risks to global economy

Oil prices fell on Wednesday after a report allayed concerns about tightening supply, ending a rally that took <a href="https://www.google.com/url?q=https://www.wionews.com/business-economy/oil-prices-hit-highest-since-november-as-us-to-tighten-iran-sanctions-212879/amp&amp;sa=U&amp;ved=0ahUKEwiRgKK3vOjhAhUUknAKHb0NCLoQFggaMAc&amp;client=internal-uds-cse&amp;cx=006054055338965708568:09spwrlibei&amp;usg=AOvVaw24jA3hkoQCpXSVi94iqTVt">prices to their highest since early November</a> on concerns that OPEC output cuts and sanctions would take too much oil out of the market.

The International Energy Agency (IEA), a watchdog for oil-consuming countries, said in a statement on Tuesday that markets are "adequately supplied" and that "global spare production capacity remains at comfortable levels."

Also weighing on prices, US&nbsp;crude stocks rose by 6.9 million barrels last week, more than expected, data from industry group the American Petroleum Institute showed on Tuesday.

EIA stocks data is due later on Wednesday.

Brent crude futures were at $74.18 per barrel at 0848 GMT, down 33 cents from their last close.

It was the benchmark's first fall after three days of rises, but it is still set for its fifth consecutive weekly gain.

US&nbsp;West Texas Intermediate (WTI) crude futures were at $65.89 per barrel, down 41 cents from their previous settlement - not enough to steer them away from what is set to be their eighth week of gains.

Crude oil prices for spot delivery rallied after the United States said on Monday it would end all exemptions for sanctions against Iran, demanding countries halt oil imports from Tehran from May or face punitive action from Washington.

China, Iran's biggest oil customer, has formally complained about the move.

The spot price surge has put the Brent forward curve into steep backwardation, in which prices for later delivery are cheaper than for prompt dispatch.

The United States has said it saw Saudi Arabia as a partner to balance oil markets.

"The (Saudi) kingdom will be relied upon to work with other producers to keep markets adequately supplied," PVM said in a note.

But some analysts say the market was still fundamentally bullish.

"The factors that could lead to higher prices are overwhelming," said Carsten Fritsch at Commerzbank, adding a push towards $80 a barrel was more likely than a fall below $70.

Saudi Energy Minister Khalid al-Falih said on Wednesday its production in May will not vary greatly from previous months.

He added that Saudi Arabia will aim to stick to its output quota fixed in a deal by the Organization of the Petroleum Exporting Countries (OPEC), Russia and others, but that June numbers will be determined in a couple of weeks depending on customers' needs.

Oil prices fell on Wednesday after a report allayed concerns about tightening supply, ending a rally that took prices to their highest since early November on concerns that OPEC output cuts and sanctions would take too much oil out of the market.

Oil prices fell on Wednesday after a report allayed concerns about tightening supply, ending a rally that took prices to their highest since early November on concerns that OPEC output cuts and sanctions would take too much oil out of the market. The International Energy Agency (IEA), a watchdog for oil-consuming countries, said in a statement on Tuesday that markets are "adequately supplied" and that "global spare production capacity remains at comfortable levels." Also weighing on prices, US crude stocks rose by 6.9 million barrels last week, more than expected, data from industry group the American Petroleum Institute showed on Tuesday. EIA stocks data is due later on Wednesday. Brent crude futures were at $74.18 per barrel at 0848 GMT, down 33 cents from their last close. It was the benchmark's first fall after three days of rises, but it is still set for its fifth consecutive weekly gain. US West Texas Intermediate (WTI) crude futures were at $65.89 per barrel, down 41 cents from their previous settlement - not enough to steer them away from what is set to be their eighth week of gains. Crude oil prices for spot delivery rallied after the United States said on Monday it would end all exemptions for sanctions against Iran, demanding countries halt oil imports from Tehran from May or face punitive action from Washington. China, Iran's biggest oil customer, has formally complained about the move. The spot price surge has put the Brent forward curve into steep backwardation, in which prices for later delivery are cheaper than for prompt dispatch. The United States has said it saw Saudi Arabia as a partner to balance oil markets. "The (Saudi) kingdom will be relied upon to work with other producers to keep markets adequately supplied," PVM said in a note. But some analysts say the market was still fundamentally bullish. "The factors that could lead to higher prices are overwhelming," said Carsten Fritsch at Commerzbank, adding a push towards $80 a barrel was more likely than a fall below $70. Saudi Energy Minister Khalid al-Falih said on Wednesday its production in May will not vary greatly from previous months. He added that Saudi Arabia will aim to stick to its output quota fixed in a deal by the Organization of the Petroleum Exporting Countries (OPEC), Russia and others, but that June numbers will be determined in a couple of weeks depending on customers' needs.

Oil prices fall from a six-month high on signs the market not as tight as feared

Saudi Arabia plans to become a major gas exporter within a decade raise questions about what the real goal of the kingdom’s policy, and by extension that of the United States, is towards Iran.

Officially both Saudi Arabia and the US, which last year withdrew from the 2015 international accord that curbs the Islamic republic’s nuclear programme and imposed harsh economic sanctions, are demanding a change of Iran’s regional and defence policies rather than of its regime.

Yet, statements in recent years by some Saudi leaders and US officials as well a string of declarations at the recent US-sponsored ministerial to promote a future of peace and stability in the Middle East in Warsaw by officials of the Trump administration as well as Saudi Arabia, Israel, the United Arab Emirates (UAE) and Bahrain suggested that regime change was on their radar.

President Donald J Trump’s hard-line national security advisor John Bolton, a past advocate of regime change and a covert war to destabilise Iran, concluded an outline on the White House’s official Twitter account of Washington’s long list of grievances and accusations levelled at Iranian leaders by addressing supreme leader, Ayatollah Ali Khamenei, directly: “I don’t think you’ll have too many more anniversaries,” Bolton said as Iran celebrated the 40th anniversary of its Islamic revolution.

The notion that the real goal of Saudi and US policy is regime change prompted by the sanctions and a destabilisation campaign that would foster unrest among Iran’s ethnic minorities was bolstered by multiple indicators.

These include statements of Saudi crown prince Mohammed bin Salman and Bolton before he became Trump’s advisor; a flow of funds from the kingdom to militant, ultra-conservative anti-Shiite, anti-Iranian madrassas or religious seminaries that dot the Iranian border in the troubled Pakistani province of Balochistan; US and Saudi support for an exiled Iranian group that demands regime change in Tehran; and a string of recent attacks inside Iran.

With Saudi Arabia, however, announcing that it will invest $150 billion to enable it to export three billion cubic metres of gas a year by 2030, suggests that imminent regime change may not be in the kingdom’s immediate interest.

Viewed through the lens of the timeline of Saudi Arabia’s gas plans, the Kingdom is likely to benefit more from an Iran that is isolated and weakened for years to come to give the Saudis the time to get up to speed on gas rather than an Iran that under a new more accommodating government returns to the international fold. A potential destabilisation campaign that is low-level and intermittent but not regime threatening would serve that purpose.

It would also extend the window of opportunity on which Saudi Arabia relies to assert regional leadership. That window of opportunity exists as long as the obvious regional powers – Iran, Turkey and Egypt – are in various degrees of disrepair. Punitive economic sanctions, international isolation and domestic turmoil serve to keep Iran weak and unable to leverage its assets.

The emergence of Saudi gas plans appears to put Saudi strategy towards Iran at cross purposes. If Saudi Arabia’s gas-driven interest is prolonged containment of Iran, operations at the Indian-backed Arabian Sea port of Chabahar were believed to have given the effort to achieve a change of Tehran’s regional and defence policy, if not its regime, a sense of urgency.

Pakistani militants reported the flow of Saudi funds to Baloch Madrassas at the time that a government-backed Saudi think-tank, the International Institute of Iranian Studies, argued in a study that Chabahar, a mere 70 kilometres up the coast from the Chinese-backed Pakistani port of Gwadar posed “a direct threat to the Arab Gulf states” that called for “immediate countermeasures.”

Written by Mohammed Hassan Husseinbor, identified as an Iranian political researcher, the study warned that Chabahar posed a threat because it would enable Iran to increase its market share in India for its oil exports at the expense of Saudi Arabia, raise foreign investment in the Islamic republic, increase government revenues, and allow Iran to project power in the Gulf and the Indian Ocean.

Pakistani analysts expect around $5 billion in Afghan trade to flow through Chabahar after India in December started handling the port’s operations. It could also further strain ties with Pakistan that accuses India of fomenting nationalist unrest in Balochistan. India and Pakistan are on the brink of a &nbsp;potentially escalating military conflict over Kashmir.

The perceived threat of Chabahar, however, pales against the opportunity that Saudi Arabia’s ability to be a major gas exporter would open up.

In a study published in 2015, energy scholar Micha’el Tanchum suggested that it would be gas supplies from Iran and Turkmenistan, two Caspian Sea states, rather than Saudi oil that would determine which way Eurasia’s future energy architecture tilts: China, the world’s third largest LNG importer, or Europe.

With 24.6 billion cubic metres potentially available for annual piped exports beyond its current supply commitments, Iran, unfettered by sanctions and with no Saudi competition, could emerge as Eurasia’s swing producer, which would significantly enhance its regional clout.

Iranian foreign minister Mohammad Javad Zarif’s resignation in recent days, had it been accepted by President Hasan Rouhani, would have amounted to a victory for hardliners and served the interest of the Saudis and their allies.

“Zarif went. We are rid of him,” Israeli prime minister Benyamin Netanyahu gloated prematurely on his Farsi-language Twitter account.

The departure of Zarif, a suave, US-educated moderate who was Iran’s main negotiator of the nuclear accord, would have enhanced the quest of Saudi Arabia and its allies even if their timelines for a change of Iranian policies, if not of the regime, differ.

His continued tenure as foreign minister is likely to encourage Europe, China and Russia in their efforts to salvage the nuclear deal but little to change Saudi or US long-term strategy. 
 
(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL.)

Saudi Arabia plans to become a major gas exporter within a decade raise questions about what the real goal of the kingdom’s policy, and by extension that of the United States, is towards Iran.

Saudi Arabia plans to become a major gas exporter within a decade raise questions about what the real goal of the kingdom’s policy, and by extension that of the United States, is towards Iran. Officially both Saudi Arabia and the US, which last year withdrew from the 2015 international accord that curbs the Islamic republic’s nuclear programme and imposed harsh economic sanctions, are demanding a change of Iran’s regional and defence policies rather than of its regime. Yet, statements in recent years by some Saudi leaders and US officials as well a string of declarations at the recent US-sponsored ministerial to promote a future of peace and stability in the Middle East in Warsaw by officials of the Trump administration as well as Saudi Arabia, Israel, the United Arab Emirates (UAE) and Bahrain suggested that regime change was on their radar. President Donald J Trump’s hard-line national security advisor John Bolton, a past advocate of regime change and a covert war to destabilise Iran, concluded an outline on the White House’s official Twitter account of Washington’s long list of grievances and accusations levelled at Iranian leaders by addressing supreme leader, Ayatollah Ali Khamenei, directly: “I don’t think you’ll have too many more anniversaries,” Bolton said as Iran celebrated the 40th anniversary of its Islamic revolution. The notion that the real goal of Saudi and US policy is regime change prompted by the sanctions and a destabilisation campaign that would foster unrest among Iran’s ethnic minorities was bolstered by multiple indicators. These include statements of Saudi crown prince Mohammed bin Salman and Bolton before he became Trump’s advisor; a flow of funds from the kingdom to militant, ultra-conservative anti-Shiite, anti-Iranian madrassas or religious seminaries that dot the Iranian border in the troubled Pakistani province of Balochistan; US and Saudi support for an exiled Iranian group that demands regime change in Tehran; and a string of recent attacks inside Iran. With Saudi Arabia, however, announcing that it will invest $150 billion to enable it to export three billion cubic metres of gas a year by 2030, suggests that imminent regime change may not be in the kingdom’s immediate interest. Viewed through the lens of the timeline of Saudi Arabia’s gas plans, the Kingdom is likely to benefit more from an Iran that is isolated and weakened for years to come to give the Saudis the time to get up to speed on gas rather than an Iran that under a new more accommodating government returns to the international fold. A potential destabilisation campaign that is low-level and intermittent but not regime threatening would serve that purpose. It would also extend the window of opportunity on which Saudi Arabia relies to assert regional leadership. That window of opportunity exists as long as the obvious regional powers – Iran, Turkey and Egypt – are in various degrees of disrepair. Punitive economic sanctions, international isolation and domestic turmoil serve to keep Iran weak and unable to leverage its assets. The emergence of Saudi gas plans appears to put Saudi strategy towards Iran at cross purposes. If Saudi Arabia’s gas-driven interest is prolonged containment of Iran, operations at the Indian-backed Arabian Sea port of Chabahar were believed to have given the effort to achieve a change of Tehran’s regional and defence policy, if not its regime, a sense of urgency. Pakistani militants reported the flow of Saudi funds to Baloch Madrassas at the time that a government-backed Saudi think-tank, the International Institute of Iranian Studies, argued in a study that Chabahar, a mere 70 kilometres up the coast from the Chinese-backed Pakistani port of Gwadar posed “a direct threat to the Arab Gulf states” that called for “immediate countermeasures.” Written by Mohammed Hassan Husseinbor, identified as an Iranian political researcher, the study warned that Chabahar posed a threat because it would enable Iran to increase its market share in India for its oil exports at the expense of Saudi Arabia, raise foreign investment in the Islamic republic, increase government revenues, and allow Iran to project power in the Gulf and the Indian Ocean. Pakistani analysts expect around $5 billion in Afghan trade to flow through Chabahar after India in December started handling the port’s operations. It could also further strain ties with Pakistan that accuses India of fomenting nationalist unrest in Balochistan. India and Pakistan are on the brink of a potentially escalating military conflict over Kashmir. The perceived threat of Chabahar, however, pales against the opportunity that Saudi Arabia’s ability to be a major gas exporter would open up. In a study published in 2015, energy scholar Micha’el Tanchum suggested that it would be gas supplies from Iran and Turkmenistan, two Caspian Sea states, rather than Saudi oil that would determine which way Eurasia’s future energy architecture tilts: China, the world’s third largest LNG importer, or Europe. With 24.6 billion cubic metres potentially available for annual piped exports beyond its current supply commitments, Iran, unfettered by sanctions and with no Saudi competition, could emerge as Eurasia’s swing producer, which would significantly enhance its regional clout. Iranian foreign minister Mohammad Javad Zarif’s resignation in recent days, had it been accepted by President Hasan Rouhani, would have amounted to a victory for hardliners and served the interest of the Saudis and their allies. “Zarif went. We are rid of him,” Israeli prime minister Benyamin Netanyahu gloated prematurely on his Farsi-language Twitter account. The departure of Zarif, a suave, US-educated moderate who was Iran’s main negotiator of the nuclear accord, would have enhanced the quest of Saudi Arabia and its allies even if their timelines for a change of Iranian policies, if not of the regime, differ. His continued tenure as foreign minister is likely to encourage Europe, China and Russia in their efforts to salvage the nuclear deal but little to change Saudi or US long-term strategy. (Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL.)

Saudi Arabia tends to intensify efforts to isolate Iran

Amid the rising fuel price in the country, Prime Minister Modi on Monday held a meeting with CEOs and experts from the Oil and Gas sector from both India and abroad.

The meeting which was held in Delhi to attract private investment and raise domestic and gas oil production was attended by Union Ministers Arun Jaitley and Dharmendra Pradhan, Vice-Chairman NITI Aayog Dr. Rajiv Kumar, Mukesh Ambani among others.

PM Modi in the meeting&nbsp;highlighted the&nbsp;economic challenges including serious resource crunch that the consuming countries face due to rising crude oil prices.

He also noted that the oil market was producer driven and both the quantity and prices are determined by the oil-producing countries.&nbsp;

PM Modi added that though there was enough production, the unique features of marketing in the oil sector had pushed up the oil prices.

He also emphasised that the cooperation of oil-producing countries would be very critical to bridging this gap.

The prime minister also noted the significant positioning of India in the oil and gas market and said the oil market was producer driven and quantity and prices were determined by oil-producing countries.

He also asked the oil producers like Saudi Arabia to initiate steps to bring down rates to reasonable levels.

Later speaking at the meeting Saudi Oil Minister Khalid A Al-Falih raised the issue of "consumer pain" from high crude oil prices.

He said the consumer pain was heard loud and clear from the prime minister.&nbsp;

Falih added that the "pain" would have been "much louder" but the action by Saudi Arabia to invest in creating spare capacity has used to lessen price shocks.

"Prime minister cautioned producers like myself not to kill hen that lays golden egg, he said referring to consumers are the golden hen," Al-Falih added.

On technology, PM Modi appealed for assistance in areas where high pressure and high-temperature technology applications are relevant to commercial exploitation of natural gas.&nbsp;

He also requested for review of payment terms so as to provide temporary relief to the local currency.

Speaking at the event Union Minister Dharmendra Pradhan at India Energy Forum in New Delhi said, "Energy today is a global industry and oil is truly a global commodity. Hence our engagements with global energy community has to be continuous to address the challenges of transition in energy for a secured energy future".

Global CEOs and Experts appreciated steps taken by Government over last four years, for ease of doing business and specifically in energy sector in India. Experts made special mention of India’s competitive ranking from upstream investment point of view which has gone up from 56 to 44, ANI reported.

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<a href="https://twitter.com/hashtag/WATCH?src=hash&amp;ref_src=twsrc%5Etfw">#WATCH</a> Under PM Modi's stewardship, doing business in India has become significantly easier. FDI has grown and inflation is under <a href="https://t.co/N8evHq6gNi">https://t.co/N8evHq6gNi</a> other words, PM Modi is making good of his promise of 'Acche Din': Saudi Arabia Energy Minister Khalid A. Al-Falih <a href="https://t.co/4KmB32EAJU">pic.twitter.com/4KmB32EAJU</a>
— ANI (@ANI) <a href="https://twitter.com/ANI/status/1051784569287045120?ref_src=twsrc%5Etfw">October 15, 2018</a></blockquote>
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&nbsp;

This was PM Modi's third meeting to revive investment in oil and gas exploration and production.

Modi's first meeting was on January 5, 2016, where suggestions for reforming natural gas prices were made. More than a year later, the government allowed higher natural gas price for yet-to-be-produced fields in difficult areas like deep sea.

In the last edition in October 2017, suggestions were made for giving out equity to foreign and private companies in producing oil and gas fields of state-owned ONGC and OIL. But the plan could not go through in view of strong opposition from Oil and Natural Gas Corp (ONGC).

The government is looking at private investment to raise domestic oil and gas production, which has stagnated for the last few years while fuel demand has been rising by 5-6 per cent annually.

India is dependent on imports to meet 83 per cent of its demand and more than half of its natural gas requirements.

The Prime Minister in 2015 had set a target of reducing India's oil dependence by 10 per cent to 67 per cent (based on import dependence of 77 per cent in 2014-15) by 2022. Import dependence has only increased since then and the government is now looking for ways to raise domestic output.

(With inputs from agencies)

Amid the rising fuel price in the country, Prime Minister Modi on Monday held a meeting with CEOs and experts from the Oil and Gas sector from both India and abroad.

Amid the rising fuel price in the country, Prime Minister Modi on Monday held a meeting with CEOs and experts from the Oil and Gas sector from both India and abroad. The meeting which was held in Delhi to attract private investment and raise domestic and gas oil production was attended by Union Ministers Arun Jaitley and Dharmendra Pradhan, Vice-Chairman NITI Aayog Dr. Rajiv Kumar, Mukesh Ambani among others. PM Modi in the meeting highlighted the economic challenges including serious resource crunch that the consuming countries face due to rising crude oil prices. He also noted that the oil market was producer driven and both the quantity and prices are determined by the oil-producing countries. PM Modi added that though there was enough production, the unique features of marketing in the oil sector had pushed up the oil prices. He also emphasised that the cooperation of oil-producing countries would be very critical to bridging this gap. The prime minister also noted the significant positioning of India in the oil and gas market and said the oil market was producer driven and quantity and prices were determined by oil-producing countries. He also asked the oil producers like Saudi Arabia to initiate steps to bring down rates to reasonable levels. Later speaking at the meeting Saudi Oil Minister Khalid A Al-Falih raised the issue of "consumer pain" from high crude oil prices. He said the consumer pain was heard loud and clear from the prime minister. Falih added that the "pain" would have been "much louder" but the action by Saudi Arabia to invest in creating spare capacity has used to lessen price shocks. "Prime minister cautioned producers like myself not to kill hen that lays golden egg, he said referring to consumers are the golden hen," Al-Falih added. On technology, PM Modi appealed for assistance in areas where high pressure and high-temperature technology applications are relevant to commercial exploitation of natural gas. He also requested for review of payment terms so as to provide temporary relief to the local currency. Speaking at the event Union Minister Dharmendra Pradhan at India Energy Forum in New Delhi said, "Energy today is a global industry and oil is truly a global commodity. Hence our engagements with global energy community has to be continuous to address the challenges of transition in energy for a secured energy future". Global CEOs and Experts appreciated steps taken by Government over last four years, for ease of doing business and specifically in energy sector in India. Experts made special mention of India’s competitive ranking from upstream investment point of view which has gone up from 56 to 44, ANI reported. #WATCH Under PM Modi's stewardship, doing business in India has become significantly easier. FDI has grown and inflation is under https://t.co/N8evHq6gNi other words, PM Modi is making good of his promise of 'Acche Din': Saudi Arabia Energy Minister Khalid A. Al-Falih pic.twitter.com/4KmB32EAJU — ANI (@ANI) October 15, 2018 × This was PM Modi's third meeting to revive investment in oil and gas exploration and production. Modi's first meeting was on January 5, 2016, where suggestions for reforming natural gas prices were made. More than a year later, the government allowed higher natural gas price for yet-to-be-produced fields in difficult areas like deep sea. In the last edition in October 2017, suggestions were made for giving out equity to foreign and private companies in producing oil and gas fields of state-owned ONGC and OIL. But the plan could not go through in view of strong opposition from Oil and Natural Gas Corp (ONGC). The government is looking at private investment to raise domestic oil and gas production, which has stagnated for the last few years while fuel demand has been rising by 5-6 per cent annually. India is dependent on imports to meet 83 per cent of its demand and more than half of its natural gas requirements. The Prime Minister in 2015 had set a target of reducing India's oil dependence by 10 per cent to 67 per cent (based on import dependence of 77 per cent in 2014-15) by 2022. Import dependence has only increased since then and the government is now looking for ways to raise domestic output. (With inputs from agencies)

PM Modi tells oil-producing countries that high prices are hurting global growth

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