Category Archives: Mexico

Putin’s OPEC tactics: Iran sanctions and the Saudis [IBD cites me]

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June 2018 OPEC meeting’s key players (AP)

Last week, Gillian Rich at Investor’s Business Daily (Washington), asked me (Berlin) and others about the OPEC’s 20-21 June meeting. Below here, I give my views in more detail, including the tie-in to the Trump project to isolate Iran and my comment about Putin likely betraying the Iranians again.  The IBD piece is here: Trump Could Make OPEC’s Next Meeting As Dysfunctional As G-7 Summit. 15 June ’18.

We spoke about market and geopolitical aspects. On the latter, I emphasized both the Trump Administration’s evolving plan to sanction and isolate Iran, and Russia’s new role as a central player with OPEC ever since the 2016 joint Russian-OPEC decision to raise production.

That’s when Putin played a new role for any Russian leader. Not only did he coordinate Russian oil policy with OPEC’s, he got personally involved in heated discussions, getting on the phone late in the last night with Iranian and Saudi leaders to get the deal sealed.

This new Russian role was clearly foreseen by al-Naimi, Saudi oil minister from 2014, before al-Falih replaced him as minister, to serve the new king, Salman, and his son Prince MbS.

In 2014, as prices were crashing, al-Naimi said that there was no way  nowadays that OPEC alone could cut sufficient production to reverse this. Indeed, he met with Russia and Mexico, at the insistence of Venezuela, before the late-2014 OPEC summit to see what these two  non-OPEC states were willing to do to help out.  At that time, the Russians (much less the Mexicans) were still unwilling to join with OPEC. So, instead of implementing cuts, al-Naimi led OPEC to increase production, declaring a (ultimately unsuccessful) price war against US shale producers, whose new cheap oil had been driving down prices.

Finally, in 2016, after almost two years of crushingly low prices, Russia was finally willing to come onboard late in the year, joining in the first-ever coordinated OPEC-Russian production cuts, and in the process Putin (and Rosneft’s Igor Sechin) personally played an essential role inside OPEC by cajoling the Iranians to go along with the Saudi-Russian plan – as per the aforementioned late-night phone  calls.

So, here we are another two years later, in mid-2018:  the Russia-Saudi, or OPEC/NOPEC combo has finally gotten the previous global oil glut and low-prices somewhat under control.  Aided by growing global demand for oil, their cuts have gotten storage in the USA and elsewhere down, and they have gotten lucky as long as US shale producers face temporary limits on getting their rapidly growing production to market for a lack of pipeline capacity to USA ports.

Now that they’ve begun to get some leverage over prices, Russia and the Saudis want to reign in prices from overheating.  At the same time, they have to make up for the death spiral in production caused by the Chavez- and Maduro-led collapse of the Venezuelan oil industry, and an expected decline in Iranian exports due to the Trump administration’s campaign to impose the “strongest sanctions in history” (Sec. of State Pompeo).    Continue reading

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Falling oil price & Saudi strategy: My Sky News interview (London)

Here’s my live interview recently on Sky News – the all-news UK channel. It just went up.

Here’s the gist: Years-long high prices brought the US shale revolution and other new higher-cost oil online like offshore of Brazil and Africa. This glut was already dropping prices when the Saudi’s decided in November 2014 that OPEC alone could not cut enough production to reverse the slide. So what to do if Russia and Mexico won’t join an OPEC cut? Continue reading